In its recent 2024-2027 Fiscal Plan, the Alberta government is ushering in significant changes that will increase the transaction fees and closing costs paid by homebuyers and those seeking to refinance and transfer their mortgage, across the province.
Historically, closing costs on a property in Alberta are amongst the lowest in Canada.
In Ontario and British Columbia, the Land Transfer Tax (LTT) or Property Transfer Tax (PTT), as it’s called in BC, often make up a considerable portion of closing costs, especially as property prices have been rising. On the contrary, closing costs in Alberta have not been subject to land transfer taxes, which made buying a property in Alberta more affordable.
Like every good party, this one is also coming to an end. Come January 2024, Alberta homebuyers will face an increased Land Titles Registration Levy, which will introduce a modest increase in closing costs.
What is the Alberta Land Titles Registration Levy?
Currently, when you purchase a home or get a mortgage in Alberta, you are paying Land Titles registration fees. These fees in Alberta are calculated based on a formula.
For property transfers, the fees consist of a base fee of $50, plus $2.00 per $5,000 of property value. Similarly, mortgage registrations incur a base fee of $50, plus $1.50 per $5,000 of the principal amount.
So if you are purchasing a $300,000 property, with a $200,000 mortgage, your current fees would be calculated as:
Property Transfer: $50 + ($300,000/$5000)*$2= $170
Mortgage Registration: $50 + ($200,000/$5,000)*$1.50 = $110
Using this example, prior to January 2025, you’d be paying a total of $280 ($170 for your property transfer + $110 for your mortgage transfer)
What are the new Alberta Land Title Registration Fees?
Under the new llevy, property transfers and mortgage registrations will now incur a flat fee of $5.00 per $5,000 of property value. This marks a significant departure from the previous fee structure, which comprised a base fee of $50 plus variable charges.
To grasp the real impact of this change, let's consider some practical examples. Imagine you're purchasing a new home valued at $600,000 and financing it with a $480,000 mortgage. Under the old fee structure, the total levy would amount to $434. However, with the introduction of the Land Titles Registration Levy, the fees spike to $1,130, resulting in an additional cost of $696.
For larger transactions, such as the purchase of a $10,000,000 apartment complex with a $6,000,000 commercial loan, the disparity becomes even more pronounced. Under the old fee structure, the total levy would be $5,850, whereas the new fees soar to $16,050, representing a substantial increase in costs.
Alberta is still a bargain
Despite the significant increase in fees, Alberta still maintains its position as one of the provinces with relatively low charges for land title registrations. When compared to other provinces, Alberta's fees remain competitive. Additionally, the government anticipates that the Land Titles Registration Levy will generate additional revenue streams, projecting $45 million in 2024-25 and $91 million in 2025-26.
The Bottom Line
The introduction of the Land Titles Registration Levy brings a notable shift in the cost structure for real estate transactions in Alberta. While homebuyers may need to adjust to the increased fees, it's essential to recognize Alberta's continued competitiveness in terms of registration charges. As legislation implementing these changes is expected in spring 2024, it's crucial for homebuyers and property owners to stay informed and adapt to the evolving real estate landscape in the province.
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