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  • Most Common First Time Closing Mistake

    Most Common First Time Closing Mistake

    We love working with first time home buyers and are always striving to educate clients to ensure their first closing experience is a smooth one.

    Let’s face it. Buying a home isn’t easy.  There’s a lot to know about buying and closing a home and while there’s a flood of information out there, it is important to get the right professionals working with you to make your home buying experience as smooth and stress-free as possible.

    The most common first time closing mistake we see with buyers is forgetting to budget for closings costs. With all the excitement, first time buyers often forget that these closing costs must be paid upfront in cash, unlike the mortgage which is amortized and paid in instalments over time.

    Before the keys can be handed over, however, there are still a few expenses buyers need to shell out for. These closing costs must be paid upfront in cash, unlike the mortgage which is amortized and paid in installments over time.

    Below we've broken down the closing costs you need to know about as a buyer so you don't fall for the most common first time closing mistake:

    Down Payment

    While your lender will provide your mortgage funds to your real estate lawyer on closing day, as a buyer, you must have the cash down payment ready to go, minus any amount that has already been paid as part of your deposit.

    If you aren’t liquid (meaning you don’t have the down payment money sitting in cash), make plans to have the down payment cash ready at least 3-4 days prior to closing.  Keep in mind that if you have your money with an online bank, it may take a few days to transfer funds, so plan accordingly.

    Your lawyer will be in touch a few days prior to closing to let you know the exact amount to bring towards the closing.  This amount will include any adjustments, legal fees, land transfer tax and other costs we’ll discuss shortly.

    For information on how your family may be able to help you cover this cost visit our gifting a down payment blog post.

    Adjustments

    What's an "adjustment"?

    If you are buying a resale or new construction property, you will likely have to pay for several adjustments on closing. Adjustments can include payments for utilities, property taxes or in cases of new construction, account setup fees, development charges, and others.

    Adjustments can range from a few hundred to several thousand dollars.   For example, if the seller of your property has paid property taxes for the year and you are buying the property halfway through the year, you will owe the seller your portion of the property taxes.  

    Your lawyer will inform you of adjustments a few days prior to closing.

    Land Transfer Tax or Property Transfer Tax (LTT / PTT)

    Home purchases in Ontario and British Columbia are subject to a provincial land transfer tax. Outside of the down payment, this is likely the largest outlay to be paid at the time of closing so it is very important to budget for.

    Home buyers in the City of Toronto pay municipal land transfer tax (MLTT) in addition to the Ontario LTT, which effectively doubles the land transfer amounts owed.

    Legal Fees, Disbursements, Title Insurance

    Legal costs include a number of services, such as registering the transfer of the property and registering the mortgage. Your lawyer will also facilitate the purchase of title insurance, which protects the buyer from any other claims made toward the property. It can also include the ordering of the property survey, should the buyer wish to obtain one.

    Legal fees and title insurance premiums can vary depending on the property type, location, and several other factors.

    When you can anticipate and budget properly, the stress associated with closing your first property can be drastically reduced. Remember to consult with professionals such as your Realtor, Mortgage Broker and Real Estate Lawyer, and ask lots of questions... there's no bad or silly questions you can ask.

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  • The Top Real Estate Closing Costs to Consider in Alberta

    The Top Real Estate Closing Costs to Consider in Alberta

    It is too often that we get clients who are closing the purchase or sale of their home in Alberta and are surprised to find out that they did not budget for all their real estate closing costs.

    Nothing is more stressful than finding out you have to scramble to come up with more money for your closing.   Nobody likes surprises.  That’s why we are always aiming to educate our clients and partners early in the home buying or selling process.

    If you are buying or selling a home in Alberta, here are some of the real estate closing costs you may encounter:

    Legal Fees

    In Alberta, you will need a lawyer to close your Real Estate transaction.  Legal fees can range from $800 - $1500 and can sometimes include or exclude disbursements (expenses incurred by the lawyer, which are typically passed on to you such as couriers, search costs or other fees).

    When comparing legal fees, ask for an estimate of total fees you can expect to pay for your closing, including disbursements.

    At Deeded, we offer a flat fee for closings and you can calculate your full real estate closing costs on our website. 

    Adjustment Fees

    Say you are buying a home, closing in July and the seller has prepaid their full property taxes for the full calendar year.   In this situation, your lawyer “adjusts” the taxes so that you (as the buyer in this example), would owe a pro-rated portion of the expense to the seller.

    Typical adjustments happen for property taxes, condo/strata fees, or any other fees that may have been pre-paid or unpaid by the buyer or seller.

    It is important to always budget for adjustments as they can increase your real estate closing costs.

    Land Titles Fees

    The cost of transferring land title in Alberta is set by the Land Titles Act and charged by the Alberta Land Titles Office.   It is paid for by the purchaser of the property on closing.

    This fee is calculated based on the value of the property and the mortgage funds borrowed and can be several hundreds of dollars.

    We offer a Land Titles calculator, along with calculating any other closing costs on our website.

    Real Property Report (RPR)

    A Real Property Report (RPR) is a legal document that clearly illustrates the location of significant visible improvements relative to property boundaries.  A seller will typically have to obtain an RPR as a condition of their sale.

    The amount of work (and cost) to prepare a Real Property Report varies between properties. Lot size and shape, number of buildings, natural features, age and availability of the property boundary information all affect the cost.

    Estoppel Certificate Fees

    You need this certificate to purchase a strata unit or a condominium in Alberta.  The estoppel certificate typically costs around $200 and shows you if outstanding interest is due from the previous owner, or if there are any unpaid condo contributions or interest that is due.

    Title Insurance

    Title insurance protects you from unknown title defects (title issues that prevent you from having clear ownership of the property).  For example, existing liens against the property’s title , encroachment issues (e.g. a structure on your property needs to be removed because it is on your neighbour’s property), and Title fraud.

    Title insurance is often recommended, but is optional. The cost of a title insurance policy in Alberta can range from $200 and up, depending on the value of your property and could be a worthwhile investment for peace of mind.

    Property Insurance

    If you are borrowing money for your home, your lender will typically require that you have a certain level of insurance coverage on your home and ask for proof of insurance (also known as an insurance binder), prior to closing. Without insurance, a lender will typically not advance the mortgage funds to the lawyer.

    It is a good idea to call your insurance broker and shop around a few weeks prior to closing.

    Finally, it is important to mention that your fees can vary depending on the property, location and situation. Contact the Deeded team and we’d be happy to give you a more accurate estimate.

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