You’ve had your eye on that two-bedroom house for a while, and you’re thinking of making an offer. What do you need to know when buying your first home in Alberta?
There’s a lot to consider before signing any papers. Ask yourself the following questions:
- Can you afford it?
- Is it in the right location?
- Should you have the home inspected?
- Are any major repairs or renovations needed in the coming years?
- What other costs should you account for?
- What kind of insurance coverage do you need?
Affording Your Home
If you’ve found your dream home, you’ll likely be financing it with a mortgage. If the home needs renovations, financing allows you to roll the costs of renovations into your mortgage. According to the Canadian Mortgage and Housing Corporation (CMHC), you can finance up to 95% of the home’s post-renovation value. However, you will need at least a 5% minimum down payment.
An alternative to traditional financing is opening a home equity line of credit (HELOC), which allows you to borrow as needed and pay interest only on the amount used. Some home improvement stores, such as Home Depot and Lowe’s, offer lines of credit to customers with excellent credit scores, which can help with smaller projects.
If you’re making energy-efficient home upgrades, be sure to research provincial and federal government grants that may be available to help offset the costs. For instance, the Alberta Home Energy Plan provides rebates for certain upgrades, such as insulation and window replacements.
DID YOU KNOW? If your down payment is less than 20%, you will be required to have Mortgage Insurance through CMHC or another provider.
Getting a Home Inspection
A home inspection isn’t mandatory in Alberta, but it is highly recommended to make an informed decision before committing to such a sizable investment.
A licensed home inspector can identify major issues such as foundation problems, outdated plumbing or electrical systems, and asbestos—any of which could impact your decision to purchase or negotiate the price.
The best way to find a home inspector is through referrals from friends or family who have recently purchased a home. Your real estate agent or mortgage broker may also provide recommendations. A good home inspector will provide a detailed report and walk you through their findings.
Think of a home inspection as an extra layer of protection, ensuring you’re aware of any potential defects before finalizing your purchase.
Calculating the Closing Costs
Closing costs are additional fees that come with acquiring real estate. These fees often surprise first-time homebuyers and may include:
- Land Transfer Fees: Alberta does not charge a land transfer tax like some other provinces, but you will pay fees for property registration.
- Registration of Mortgage: $75
- Registration of Transfer: $75
- Title Insurance: Varies, but typically starts around $500
- Home Inspection Fee: Usually $500 or more
- Lawyer or Notary Fee: Typically $1,500 or more
A deposit is often required when making an offer. Your real estate agent will guide you on the appropriate amount based on the local market.
DID YOU KNOW? If you’re buying a newly built home in Alberta, you must purchase a New Home Warranty. This covers:
- Labour and materials for 1 year
- Distribution systems (electrical, plumbing, heating) for 2 years
- The building’s exterior (roof, siding, etc.) for 5 years
- Structural integrity for 10 years
Additional enhanced protection plans may be available. Speak to your real estate agent or insurance broker for more details.
Don’t Forget About Home Insurance
The average cost of home insurance in Alberta ranges from $800 to $1,200 annually, though rates vary based on multiple factors, including:
- Location (homes in flood-prone or wildfire-prone areas may have higher rates)
- Age and construction of your home
- Your personal credit history and insurance claims record
- Your chosen coverage limits and deductibles
Buying a home is one of the most significant investments you’ll ever make. Work with an insurance broker to ensure you have the right coverage to protect your new home.
