A Guide to Closing Costs in Ontario

If you’re buying or selling a property in Ontario, there are costs that you might not have considered, but that you need to factor in before you run to the bank. If you’re working with a tight budget, these costs are even more important, as a ‘surprise’ at the end of the transaction might be a step too far.

Buying a property

Costs that you WILL have

• Your down payment – this is a minimum of 5%; 20% if you want to avoid CMHC premiums as well.
• Legal fees – this can range anywhere from $1,000 – $3,000, depending on the complexity of your transaction. Typically, lawyers will have a fixed rate for a residential home purchase or sale, with a few disbursements added in. Like what? They will often buy title insurance on a purchase, plus there are fees to register the mortgage, the deed, faxes, copies and so on.
• Land transfer tax – this is a tax paid by the buyer; it is a percentage based on the value that you are paying for the home and its location. So for example, a $500,000 home in Kingston would have a tax amount of $6475.00. That same house in Toronto would have a rate of $12950.00. Toronto homes have a municipal tax, as well as the provincial one. One bonus for first time home buyers is that they are eligible for a rebate on the land transfer tax! For the Kingston home mentioned above, that would amount to a $4000.00 rebate. In Toronto? $8475.00. These refunds can be claimed at registration, offsetting the amount to be paid.
• Property tax / utilities / condo fee adjustments – when you buy a home, the previous owners may already have paid the property taxes and some of the utilities and / or condo fees beyond the close date: there is an adjustment that is made in their favour to pay them back those amounts, as of the close date.

Costs that you MIGHT have

• Cost of a survey – if there is any doubt as to your property boundaries, any easements or other limitations as to the scope of what you are buying, it’s a good idea to get a survey. Some financial institutions will require it as a lending condition. This can run you anywhere from $500-$2500.00
• Cost of a home inspection – these will run about $400-$500 and if you’re buying a rural property, you might want to consider certain extra inspections that go above and beyond your standard home inspection: septic tank and well water testing, for example.
• Appraisal fees – many lenders require an appraisal of the property to verify it’s value and whether the amount you are asking to borrow is fair. Expect to pay anywhere from $200-$500 for this.
• GST / HST on new homes – brand new builds are taxable, and in addition, you can be subject to a new home warranty enrollment fee. While some builders will add this to their price, some may not so be sure to ask!
• CMHC insurance and PST on same (which must be paid on close) – if you are putting less than 20% down payment on your purchase, you will have to pay CMHC premiums, which covers the lender in the event that you default. You will also have to pay provincial tax on the entire premium amount, up front.
• Mortgage penalties – if you have to break a mortgage (rather than porting it), you might have a penalty to pay for paying early. After all, the bank is losing out on the money that you would have paid in interest!
• Non-resident speculation tax – In April 2017, the Ontario government put in place a 15% tax (in addition to the land transfer tax) for buyers of residential property in the Golden Horseshoe area, who are not Canadian citizens or permanent residents.

Consider also the other costs associated with buying a home, beyond the mortgage payment:  These are all things that you can expect to pay, as associated with your purchase (and / or sale), and while some are ongoing (such as insurances and taxes), it’s best to figure them in to your budget up front as that first month’s payment for all of them will come quickly!

• Property insurance
• Property tax
• Condo fees
• Moving costs
• Setting up utilities and other services

Selling a property

Costs that you WILL have

• Legal fees – these are typically less than a purchase, as the transaction is more limited, but nonetheless, there will be a set fee and disbursements.

Costs that you MIGHT have

• Capital gains – if the property you are selling is not your primary residence, you will pay capital gains on the profits you’ve made in the sale. 50% of the appreciation (profit) is taxed as income.
• Realtor commission – ranging from 4-5% of the final sale price, this is the responsibility of the seller to pay.
• Mortgage penalties – if you are breaking your mortgage (rather than porting it to a new property), there could be penalties for an early closing of a mortgage.

This all seems like a lot, but in general, you can expect your closing costs to range from 1-4% of your sale price. If you factor that in right off the top, there won’t be any financial surprises when you get to your close date.