There are some possible additional associated costs when buying a home that buyers may not be aware of. In this blog post, Mortgage Design Group Inc. walks you through what costs you can expect as part of the purchase process and we answer some of your most common questions!
What are the typical associated costs when buying a home?
In Alberta, your associated costs typically include legal fees and tax adjustments. You may also find that an appraisal is required. When buying a home, you may also want to hire a professional home inspector.
While legal fees, appraisals, and home inspections are pretty straightforward terms. Jenn Kinnell, broker at Mortgage Design Group Inc., says tax adjustments can be a little more confusing. “When you’re buying a property, a portion of the annual property tax will be factored into the amount that you’re paying or receiving,” Jenn explains. This is called a property tax adjustment.
“Property tax adjustments exist for the purpose of ensuring that the buyer and the seller are only paying the portion of property taxes for when they were actually living in the home,” says Jenn. For example, if you are selling your home part way through the year, you will receive an adjustment from the buyer to compensate you for the portion of the year that you will not own your property. Similarly, if you are purchasing a home for which the annual taxes have already been paid, you will pay an adjustment to the seller to cover the portion of the year that you will own the property.
This calculation is taken care of by your lawyer and ensures that both buyer and seller are paying the correct amounts. This is because your mortgage will be insured which reduces the risk to the lender.
Are appraisals and home inspections required on all purchases and refinances?
Appraisals are not generally required if you have a down payment of less than 20%. However, Jenn adds that this might not always be the case if the property is unique. While home inspections are not mandatory, she recommends that buyers do an inspection anyway for peace of mind. This makes sure that the property you’re buying is in good condition and lets you know of any potential issues.
If you’re refinancing your home on the other hand, an appraisal is usually required.
Are lawyers required when purchasing a home or refinancing?
Yes, lawyers are required for purchases in Alberta. Your lawyer will take care of all the legal paperwork, including signing any bank documents required and performing land title transfers or registration. In a refinance situation, a lawyer or closing company is required because the mortgage amount and possibly the lender would be changing.
If you are renewing your mortgage, a lawyer is not required. When you’re transferring your mortgage from one lender to another, the new lender tends to take care of any fees associated with the transfer. There is no cost to this and homeowners are able to sign the papers with a closing company —as long as they’re happy with their new mortgage terms!
Are there any other associated costs when buying a home, selling, or refinancing?
As a homebuyer, you will not need to pay any realtor fees. If you’re selling, however, you will want to know the amount of commission that a realtor would charge.
While many mortgage brokers offer to refinance services for free, it’s important to be aware of additional costs here. If you end your current mortgage term early, you may be subject to payout penalties. At Mortgage Design Group Inc., we always explain these potential costs in detail and we do our best to help you find a product that will mitigate some of these fees! Thinking of looking for something better? Talk to us today!
Have more questions about associated costs when buying a home? Mortgage Design Group Inc. is here to help!
At Mortgage Design Group Inc., we’re always more than happy to help if you’re looking for answers. Let our professional team of brokers guide you through the entire mortgage process and learn about your mortgage options! All of our mortgage brokers are homeowners as well and are always glad to share their experiences.
With a wealth of knowledge, quick response time, and free world-class customer experience, Mortgage Design Group Inc. wants to make mortgages easy and accessible to everyone. Find a trusted partner and sit down for a conversation today—all from the comfort of your own home!