: These are "pro-rated" expenses of homeownership. You are essentially paying yourself in advance to avoid a lapse in insurance or a tax penalty. Budgeting for Prepaids
: Lenders often require a "cushion" of property taxes—usually 2 to 6 months' worth—to be deposited into an escrow account. This ensures they have enough funds to pay the municipal tax bill when it eventually becomes due. which are prepaid costs when buying a home
: Lenders typically require you to pay the first full year of your hazard insurance policy upfront at closing to ensure the asset is protected immediately. REW : These are "pro-rated" expenses of homeownership
: If your down payment is less than 20%, you may have to prepay an initial premium or a portion of your private mortgage insurance at the closing table. Key Differences: Prepaids vs. Closing Costs This ensures they have enough funds to pay
In Canada, you should generally budget between of the home's purchase price to cover the combined total of closing costs and prepaids. New Homes Alberta
It is important to distinguish these recurring ownership expenses from one-time transactional fees:
: These are administrative fees for services rendered to finalize the sale, such as government recording and transfer fees, appraisal fees, and legal/notary services. REW