Six Typical Closing Costs in Ontario

By Emily Southey | 12 minute read

Maybe you’ve worked hard for the past five years and have finally put together a decent down payment for your first home. Or maybe you’re lucky and you and your spouse received generous cash gifts at your wedding, which gave you a substantial down payment. You may have even cashed in your RRSP savings to help you put together your down payment.

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However you did it, you have successfully built up your bank account to allow you to purchase your first home. But wait, it’s not over yet! Did you know that home closing costs typically amount to anywhere from 1.5% to 4% of the purchase price? So, for a $1,352,000 house in Toronto, which is the median price for a detached home in Toronto, you’ll need an extra $50,000 to cover closing costs on the closing date. Even after $8,475 in first-time buyer rebates, a first-time buyer must still pay $42,000 in closing costs!

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In fact, according to a recent survey completed in 2020 by Realtor.com, 44% of home buyers said they weren’t aware of the hidden costs involved when buying a home.

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I asked Max Cohen, a real estate lawyer in Toronto, if buyers were aware of all the closing costs involved in purchasing a home.

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Cohen indicated that when clients come to him to close their real estate deal, he always provides them with a list of the closing costs so they’re aware of what they’re getting into and what their expenditures will be. Although most people are aware of the Toronto and Ontario land transfer taxes, he says that it’s the smaller costs that cause people the most annoyance. 

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“A lot of people don’t know that the city charges a $90 processing fee for the land transfer tax.

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It’s the little costs that catch people off guard and they’re surprised when they see how they add up,” he said.

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“When a home is appraised lower than the purchase price, the bank will approve a lower mortgage amount and it’s up to the buyer to come up with a bigger down payment at the last minute. A lot of buyers also don’t know that they’ll have to pay HST on real estate commission,” he said.

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Cohen says that the biggest shock happens to buyers of new construction homes.

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“When people buy a house before construction has even started, it can be five years in advance. They have a cooling-off period to decide if they want to go through with the sale. But it isn’t until about seven days before the actual closing that the builder provides the list of adjustments and the development fees, educational levies, and these types of costs can add up to thousands. A lot of the time, buyers aren’t aware of these costs and it takes them by surprise,” he said.

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I thought I’d share my home buying journey to give you an idea of the closing costs you’ll encounter when buying and selling a home in the GTA:

My Home Buying Journey

I’d spent many months idly browsing the Realtor.ca house listings, dipping my toe in the water, but never actually making plans to go out and look at properties. I’d lived in my townhouse for 17 years and was on the fence about whether I should move or stay put in my comfortable neighbourhood.

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One Saturday as I browsed the house listings, I came upon a picture that caught my eye. It was a stacked townhouse with a rooftop terrace. Immediately, I pictured myself lounging on the rooftop terrace under an umbrella while sipping a cool drink. I knew this was the gem I’d been searching for all these months! 

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I picked up the phone and called the listing agent and things moved quicker than a pile of dominoes falling! I met with the agent and she gave me a rough appraisal of my townhouse. From there, I put in an offer of $570 k on the rooftop terrace townhouse. Since she was the listing agent, I had a good advantage because the seller wouldn’t need to pay commission to another buyer’s agent. Needless to say, my offer was accepted.

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In purchasing this Burlington townhome, I paid a provincial land transfer tax of $8,076 – no need to pay a municipal land transfer tax in Burlington! My mortgage was with one of the five big Canadian banks, and as is typical, the bank paid for my home appraisal.

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I needed to pay the owner of the townhouse for six months of land tax and one month of condo fees that he had previously paid. Since the townhome was only a few years old, I didn’t bother getting a home inspection because I knew that everything would be up to par. 

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I was selling the home I had lived in for 17 years, so I was coming in with a large down payment after having paid down my mortgage. For this reason, I didn’t need to obtain CMHC mortgage insurance. 

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Selling my home was a different story. In the back of my mind, I knew that I would eventually sell and so over the past year, I had done a few minor renovations like installing a new kitchen counter and backsplash. After prompting by my real estate agent, I gave the laundry room a new coat of paint and it was ready to put on the market. 

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Needless to say, my agent brought in the buyer the next day; since she had brought in the buyer, I didn’t need to pay a buyer’s agent and she negotiated a reduced commission fee of 4% with me, which I found reasonable (typically real estate fees for buying and selling a home are around 5%).

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The buyer paid me $585 k for my home and in turn, I paid my real estate agent $23,400 in real estate commission, plus HST.

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The buyer’s lawyer requested a condo certificate and I quickly emailed my property management firm and obtained a certificate for $250. I had one lawyer acting on my behalf for the purchase of the rooftop terrace townhouse and selling my townhouse; in total, he charged me $2500 for both the sale and purchase.

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I paid my land taxes and condo fees on a monthly basis so there was no need for my buyer to reimburse me for any taxes or condo fees.

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Building insurance for my new home was covered by the condo corporation, but I did have to arrange insurance for my personal belongings, which cost $450 per year.

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My real estate agent was a good businesswoman and savvy with the transactions so I didn’t have to worry too much about all the details. The biggest part of moving was packing up and moving into my new abode. I did a lot of research, and I ended up hiring two movers to move from Oakville to Burlington. It took the guys about six hours to move me and I paid $850.

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I’m now enjoying my rooftop terrace in my little townhouse by the lake. I live next to the GO station and this is great for hopping on the train to travel into the big city!

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I bought this townhome in December 2020 and in 2021, real estate prices skyrocketed to unprecedented levels in the GTA. Needless to say, I’ve made a tidy profit if I ever choose to sell, but for now, I’m enjoying my rooftop terrace on hazy summer days.

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If you’re a first-time homebuyer and you’re ready to splurge on what will likely be the biggest investment you’ll ever make in your lifetime, you’ll need to factor in the hidden costs that can sometimes make or break homeownership for the typical person. These hidden closing costs include land transfer tax, both provincial and municipal if you buy a home in Toronto, legal fees, appraisal fees, home inspection fees, default insurance, property tax, and more. 

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You’ll also have to factor in moving costs, which can vary widely based on how far you are moving from your existing home. 

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Let’s break down these costs so you’re not blindsided by the extra expense you’ll be faced with when you take the major life step to purchase a home.

Closing Costs in Ontario

Property Appraisal Fee

When the bank is lending you money to purchase your home, they want to reassure themselves that your potential home is in good condition and is worth the amount of money that they are lending you. In this case, you’ll need to pay an appraisal fee, which is an estimate of the value of your future home. This is important for your mortgage lender to have in case you default on your mortgage and they’re required to resell your home. 

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The appraisal fee can usually be added to your mortgage and usually costs between $300 and $500. 

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Home Inspection

Although you’re not required to complete a home inspection to get a mortgage, it’s a good idea to provide you with peace of mind when purchasing a home. A home inspection is important if you are purchasing an older home that may have potential hidden problems that you’re not aware of, such as mold or a roof that needs fixing or an old septic system.

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In this case, you’ll be aware of what you’re getting into. For example, if the house needs a new roof, you could use this as a negotiating tool with the seller to knock a few thousand off the purchase price.

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You’ll also breathe a sigh of relief if you find that historic home you fell in love with needs a new foundation that might cost $50,000. You might decide to continue to shop around!

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A typical home inspection costs from $300 to $500.

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Legal and Administrative Costs

The cost of legal fees varies from lawyer to lawyer depending on whether the purchase is more complex, such as if you’re buying a new construction home. Lawyer fees can range from $1,500 upwards and include fees for arranging title insurance, conducting a title search, a law society levy, a refinancing charge if you are refinancing, reviewing the statement of adjustments, and completing the land transfer tax affidavit.

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Condo Certificate

If you’re purchasing a condo townhouse or apartment, your lawyer will need to examine the condo/estoppels certificate. This lets your lawyer ensure that your condo does not have any claims, liens, or charges against it.

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In Ontario, the fee for requesting this certificate from the condo corporation is $100.

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Moving Costs

You’ll also have to take moving costs into consideration, which can amount to hundreds of dollars. I talked to Sandra Livingston who bought a home in 2021 to find out about her moving costs. Livingston indicated that moving costs can add up to hundreds of dollars. 

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“It took the three movers about eight hours to move my furniture from Toronto to Georgetown. I was moving from a condo to a house, which cost $1,500.”

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Moving services can range significantly based on the relocation complexity. For moves within the same city, they can be as low as $400, while moves more than 2 hours away can cost up to $4,000.

Land Transfer Tax

Buyers of homes and condos in Ontario must pay a land transfer tax. If you’re buying a property in the city of Toronto, you’ll also be responsible for paying the Toronto land transfer tax, which is calculated based on the same marginal tax rates as the Ontario provincial tax.

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The Toronto land transfer tax is charged on all Toronto properties situated within the boundaries of Steeles Avenue to the north, Etobicoke to the west, Scarborough to the east, and Lake Ontario to the south.

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The marginal tax rates for provincial and municipal land transfer tax is 0.5% of the purchase price up to $55,000, 1% of the value from $55,000 to $250,000, 1.5% of the value from $250,000 to $400,000, 2% of the value between $400,000 and $2,000,000, and 2.5% for homes worth more than 2 million.

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As you can imagine for the typical homebuyer, this is a jaw-dropping amount and cannot be included in your mortgage. For example, if you buy a home in the city of Toronto for $1,352,000, you will pay a total provincial and municipal land transfer tax of $47,000. Even if you receive a maximum land transfer tax rebate of $8,475, you’ll still need to pay $38,600 in land transfer tax.

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Land transfer tax and the record-high real estate prices in the GTA have made homeownership for the typical citizen virtually impossible unless they come into some sort of windfall, such as a new well-paying job or an inheritance.

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I interviewed a recent homebuyer, Robert Reily, to discuss his experience in buying two homes.

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Reily indicated that he was a first-time homebuyer when he bought his condo in downtown Toronto in 2017 and more recently, he bought a home in Meaford. Reily says that when he bought his condo, he wasn’t aware of the Toronto and Ontario land transfer tax. 

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“I spoke to friends and family who had bought homes and I knew about most of the closing costs and I wasn’t taken off guard. When I bought my condo, I made sure that I included a buffer for the costs. If I had known about the land transfer tax upfront, it wouldn’t have hurt,” he said.

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Reily says that he was surprised by how legal disbursements added up. 

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“My sister was my lawyer, so I knew she wasn’t overcharging me, but I didn’t realize that things like a title search can add hundreds to the cost,” he said.

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 Reily has a word of advice to potential homebuyers:

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“People should make sure that they’ve budgeted enough money to cover the closing costs because it’ll set them back thousands, and you can’t add these costs to your mortgage.” he said.

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I also spoke with another first-time homebuyer, Liz Toniolo. She says that she bought a semi- detached home with her fiance in the Roncesvalles district of Toronto in June 2021. She says she was aware of the closing costs when purchasing a home. 

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“My fiance and I come from a financial background. I’m a chartered accountant and he works at a bank, so we were savvy about the closing costs. We spoke to friends and family who had purchased homes and we knew what to expect. But the post-closing costs like buying furniture and home insurance, a security system, and small renovations were triple the amount that we had estimated,” she said.

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Toniolo indicated that given that the average price of a home in Toronto is around a million dollars, the land transfer tax on this amount is substantial. She says she hopes to remain in her current home for at least six years.

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Land Transfer Tax Refund

The government has tried to help first-time homebuyers with the financial burden of land transfer tax by offering a land transfer tax refund for first-time homebuyers. To be eligible to claim this refund, you must be at least 18 years of age, you cannot have owned a home or an interest in a home anywhere in the world previously, and this also applies to your spouse if you have one, and you must occupy the home within nine months of purchase. 

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As of January 1, 2017, the maximum amount of the refund is $4,000 for the Ontario land transfer tax, and it’ll cover the provincial land transfer tax (“LTT”) tax for homes worth up to $368,333.

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The maximum refund for the Toronto LTT is $4,475 which will cover the full rebate for homes worth $400,000 or less. For homes worth more than this amount, the buyer will receive the full $4,000 rebate, but must pay the remaining LTT balance.

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There are loopholes in this refund that you should be aware of. For example, if your spouse has previously owned a home, you can only claim a refund of 50%. The same is true if you are purchasing a home with your child and you have previously owned a home; in this case, your child can claim a refund of 50%. 

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Here’s a breakdown of closing costs, including LTT,  for first and second-time home buyers in Toronto and Ontario:

Homeownership has long been regarded as a desirable goal, and having a house may be a profitable investment as well as a source of security. However, the purchase price is not the bottom line, and REALTOR® and legal fees, land transfer tax, and other closing costs can make owning a home a costly venture. By considering the pros and cons of homeownership, you can better prepare and not be caught off guard.

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