Calculating Closing Costs
Guest Blog by Closing Costs
Whether you’re buying, selling or refinancing a home, you will have to pay for a number of closing costs. The rule of thumb is to expect your closing costs to add up to anywhere from 1.5 to 4% of the price of the home – and that’s on top of your down payment. First-time buyers are especially surprised when they see how quickly their closing costs add up. While mortgage brokers can give you a breakdown of what those closing costs might be, we decided to launch a new site and calculator that makes the information crystal clear. Who are we? And why is this so important to us? Keep reading.
Closing Costs Add Up Quickly
As we mentioned before, closing costs can add up to anywhere from 1.5 to 4% of the purchase price of a home. To show you just how quickly these costs can add up, we’ll walk you through an example calculation using a fictional property in Calgary.
According to the Canadian Real Estate Association (CREA), the average home price in Calgary is $442,529. Using that number as the purchase price, let’s say we’re making a 5% down payment ($22,127) and see what the other closing costs add up to.
After inputting a few example property details into the calculator and checking off that the person in this example is not a first-time homebuyer, you’ll be directed through two screens that help you choose a home inspector and a real estate lawyer in your area. Because we don’t currently have any service providers in Calgary on the website, we’ll use estimates for both: $500 for a home inspection and $1,500 for legal fees.
After running those numbers through our closing costs calculator, you can see that your total closing costs for this home would be $24,351 – that’s $2,224 over and above your down payment. You would first need to pay for a home inspection ($525 incl. GST), then your down payment ($22,127), your land title transfer fee* ($124), and finally your legal fees and disbursements ($1,575 incl. GST).
*Note that land transfer tax is often the most expensive closing cost, but Alberta only charges a small fee compared to the percentages that other provinces charge.
Final Thoughts and Next Steps
We’ve built a great website before and we hope to do it again, but our goal goes above and beyond just that. We want to help Canadians further understand every part of the entire real estate transaction, so they can make the most informed decisions possible. If you’re a first-time buyer, our education centre will help you understand the various closing costs involved in the different steps of the purchasing process. If you’re selling a home, we can show you the few closing costs that you will be responsible for. And there are even some closing costs for people who are just refinancing their home.
No matter what your situation is, run the numbers through our closing costs calculator and prepare yourself for the financial transaction you are planning to make. Share it with your family and friends. Spread the word. Help us make sure that no Canadian is left scrambling for extra cash on closing day.