Mortgage rates in Alberta
Alberta is served by all the major banks in Canada, including BMO, CIBC, RBC, Scotiabank, and TD Canada Trust. Smaller regional credit unions, mid-sized banks, mortgage brokers, and monoline lenders that operate in Alberta all help to create a competitive marketplace for mortgages in the province.
What's the difference between a fixed rate and variable rate mortgages in Alberta?
A fixed-rate mortgage gives you predictability in terms of how much your monthly mortgage payments will be. The rate you receive on a fixed-rate loan is locked in for the duration of your mortgage term. Whether bank lending rates go up or down during your mortgage term, your interest rate on your mortgage will stay the same.
The opposite of a fixed-rate mortgage is a variable rate mortgage. Interest rates on variable rate mortgages fluctuate with the prime lending rates of Canada's banks. Variable-rate mortgages allow you to take advantage of currently low borrowing rates. However, you also take on the risk that your interest rate may increase at any time during your mortgage term.
In Alberta, the vast majority of mortgages are fixed rate. In the larger cities of Calgary and Edmonton, fixed-rate mortgages make up 79.4% and 81.8%, respectively, of all mortgages. Outside of the big cities, fixed-rate mortgages make up 88.3% of all mortgages, which is the highest amongst all Canadian provinces. The high percentage of fixed-rate mortgages amongst Albertan homeowners is consistent with wider financial conservativeness amongst Canadian prairie provinces.
What's the difference between an open term and a closed term mortgage?
In Alberta, most mortgages have either closed terms or open terms. A closed term mortgage implies that you are restricted in how much you can make in prepayments every year. Prepayments are additional payments you can make, every year, towards paying down your mortgage sooner. If you exceed the prepayment limits set by your mortgage lender, they can charge you a prepayment penalty.
Open term mortgages place no limits on prepayments. You are free to make extra payments towards your mortgage or pay it off completely whenever you want during the mortgage term.
Typically, closed term mortgages come in several different term lengths. Terms lengths of 6 months up to 10 years are available for closed term mortgages. Open term mortgages usually have shorter durations of 6 months or 1 year and come with higher interest rates. Most mortgage terms in Alberta are closed terms.
Land title transfer fee
Unlike most other Canadian provinces, Alberta does not have a land transfer tax. Instead, the province charges a land title transfer fee. Alberta's land title transfer fee is considerably lower than the taxes levied on the purchase of property than in other provinces.
The land title transfer fee has two components. One part of the fee is on the value of the property you're purchasing. The other part of the fee is on the mortgage amount for the purchase.
The land title transfer fee is calculated as follows:
- On the property value, you'll pay $50 plus $1 for every $5000 of the property's value (rounded up to the nearest $5,000)
- On the mortgage amount, you'll pay $50 plus $1 for every $5000 of the mortgage amount (rounded up to the nearest $5,000)
Alberta does not provide any full or partial rebate for first-time homebuyers. Anyone purchasing a property in Alberta is subject to the same land title transfer fees.
To demonstrate how the land transfer fee works, suppose you purchase a home in Alberta for $500,000. You place a down payment of $100,000 and take out a mortgage of $400,000 on your purchase. The land title transfer fee would be:
- $150 on the property value ($50 + [$500,000/ $5,000])
- $130 on the mortgage amount ($50 + [$400,000 / $5,000])
The total land title transfer fee would come out to $280 ($150 + $130).
Alberta housing market
How well Alberta's housing market does is tied to how well the province's energy sector does. During periods of growth in the energy sector, Alberta's housing market has seen healthy activity of buying and selling residential real estate.
The oil and gas industries drive most of Alberta's GDP growth. In turn, when the oil and gas industry experience a downturn, the broader Albertan economy and housing market follow suit.
Investors looking to invest in Alberta real estate should take into consideration the economic cycles of the global industry for fossil fuels. Alberta's housing and real estate markets are primarily driven by how well these industries perform.
Calgary housing market
With 1.3 million residents, Calgary is Alberta's largest city. It's also considered to be the hub of Canada's energy sector. With many of Canada's oil and gas companies headquartered in the city, the energy sector is one of Calgary's largest employers.
When the demand for global energy is strong, Calgary has low unemployment rates, and local companies hire more. The result is more demand-side pressure for housing and higher real estate prices.
Alberta mortgage brokers
Looking for a mortgage can be daunting at times. Working with a licensed mortgage broker can help streamline the mortgage application process and help you understand the various mortgage options available. They have access to an extensive network of mortgage lenders and can find you the best mortgage rate for your needs.
To become a licensed mortgage broker, in Alberta, an individual must meet the educational requirements set forth by the Real Estate Council of Alberta (RECA). The RECA is Alberta's regulatory authority that sets and enforces standards that must be met by all real estate professionals in the province. Mortgage brokers and mortgage brokerages in Alberta, all fall under the regulatory jurisdiction of the Real Estate Council of Alberta.
Within the mortgage broker industry, the Alberta Mortgage Brokers Association (AMBA), helps to further cultivate ethical and professional standards amongst its members in the province. The AMBA also works with RECA to deliver courses, education, and training for those wishing to become mortgage brokers in Alberta.
Alberta is Canada's 4th largest province by population and the 3rd largest by GDP. The province has the highest GDP per capita out of all the Canadian provinces, enjoys a high standard of living and low overall unemployment rates. The main economic driver of Alberta is the oil and gas industry.