Closing Costs in Ontario: A Complete Guide

Buying or selling a home in Ontario involves various closing costs for which buyers and sellers must budget. This comprehensive guide covers everything you need about closing costs in Ontario real estate deals.

Whether you are a first-time homebuyer or a real estate investor selling an investment property, understanding closing costs Ontario will help you financially prepare for a stress-free property transfer.

What Are Closing Costs in Ontario?

Closing costs refer to the fees and expenses, in addition to the sale price, that both home buyers and sellers have to pay to complete a real estate transaction in Ontario.

These costs are directly associated with the legal transfer of property ownership and the new title and mortgage registration. Closing costs cannot be included in your mortgage financing.

Closing disbursements must be paid in cash on the closing date before the legal transfer of the property’s title can occur.

As a buyer, you must budget closing costs separately from your down payment amount. Sellers have comparatively lower closing costs, with real estate commission making up most of the expenses.

Closing Costs for Home Buyers in Ontario

Home buyers in Ontario can expect to pay 1.5-4% of the purchase price in closing costs [Source]. Below is a detailed overview of the closing fees and disbursements they must pay.

Ontario Land Transfer Tax

A provincial land transfer tax ranging from 0.5% to 2.5% applies to all real estate purchases in Ontario, depending on the property value.

Property Price	Marginal Tax Rate
Up to $55,000	0.5%
$55,000 to $250,000	1.0%
$250,000 to $400,000	1.5%
$400,000 to $2 million	2.0%
Over $2 million	2.5%

Toronto levies an additional municipal land transfer tax of the same percentage. Thus, home buyers in Toronto pay roughly double the amount of land transfer tax compared to other regions.

First-time home buyers in Ontario can qualify for rebates of up to $4,000 provincially and $4,475 in Toronto. [Source]

For example, a first-time buyer purchasing a $700,000 home in Toronto would incur around $21.059.25 in combined provincial and municipal land transfer taxes. But they can get back $8,475 through rebates, lowering the taxes payable to $12,584.25

Down Payment

Your down payment is not technically a closing cost, but a significant upfront payment is required for the purchase. The minimum down payment is 5% for properties under $500,000, 10% for properties between $500,000 and $999,999, and 20% for properties over $1 million.

First-time home buyers also have the option of only 5% down for their first $500,000 borrowed, even if the home is over $1 million.

Ontario Legal Fees

In Ontario, lawyers must review documents, conduct searches, handle title transfers, and register mortgages in all real estate transactions.

Depending on complexity, legal fees for buyers range from $1,200 to $2,400 on average. [Source]

The buyer’s lawyer will also incur disbursement costs for services like title searches, document registrations, courier fees and more. Disbursements can add a few hundred dollars.

Ontario Title Search & Title Insurance

To ensure the property’s title is clear and valid, the buyer’s lawyer conducts a title search for any defects. This incurs search fees paid to Teranet, Ontario’s land registry service provider.

Title insurance is recommended to cover risks uncovered in the title search. Typical title insurance costs $250 to $400. Together, buyers expect $300 to $600 for title search disbursements and insurance fees.

Ontario Home Appraisal

The mortgage lender will request a home appraisal before approving financing, which costs an average of $350 to $700.

The appraisal verifies the property is worth the purchase price and qualifies for the loan amount.

Ontario Home Inspection

While optional, a professional home inspection before closing is highly recommended. This comprehensive inspection identifies issues with the home that could cost thousands in repairs.

Typical home inspection fees range from $400 to $700 for a single-family home, depending on the size, age, and location.

Mortgage Application & Registration

If financing the purchase, mortgage-related fees will apply, including interest, mortgage default insurance if under 20% down payment, and mortgage registration filing fees of around $82. [Source]

Mortgage brokers may also charge service fees of 1% to 2% of the loan amount.

Ontario Property Survey

If an existing survey for the property dated within the last few years is unavailable, buyers may need a new survey to mark exact property boundaries. Costs typically run $0000 to $2000, depending on the property size and complexity. [Source]

Mortgage Default Insurance

If your down payment is less than 20% of the purchase price, your lender will require you to get high-ratio mortgage default insurance. This protects the lender from any losses if you default on the mortgage. The premium is based on your down payment amount.

The default insurance premium is typically added to your mortgage loan and paid off over time. However, you must pay the sales tax upfront on closing day.

Ontario GST/HST on New Homes

For brand-new properties, buyers must pay HST on the purchase price, which includes 5% GST and 8% PST in Ontario. This means the GST/HST in Ontario is 13%, which can add tens of thousands in tax.

Tarion Warranty Fee

On newly constructed homes in Ontario, buyers must pay a Tarion warranty fee to the builder, which ranges from $385 to $1500 based on the home’s purchase price. This covers deposits and defects. [Source]

Ontario Moving Costs

While not mandatory, buyers should budget for moving costs, which typically exceed $500 depending on factors like:

• Distance being moved
• Amount of possessions
• Type of home access – Elevator, stairs, etc.
• Time of year

Adjustments

When ownership legally transfers to the buyer, any expenses already paid by the seller covering time after the closing date must be pro-rated and reimbursed. Common adjustments include:

• Utility bills – Buyer reimburses the seller for unused water, hydro, etc.
• Property taxes – Daily rate credited to the seller for prepaid taxes
• Condo fees – Buyer pays their share based on the closing date
• Rent – Seller credits back any prepaid rent

These adjustments often add $500 or more to a buyer’s closing costs.

Closing Costs for Home Sellers in Ontario

While typically lower than buyer costs, selling a home also involves closing disbursements:

Realtor Commission Fees: In Ontario, real estate commission for sellers is typically 3.5% to 5% of the home’s sale price. This commission is paid to the seller’s and buyer’s agents from the sale proceeds, usually split between them. [Source]

Legal Fees: The seller’s lawyer will handle closing documents, title transfers, answering buyer requisitions, and releasing funds.

Mortgage Discharge: If selling before the mortgage term expires, penalties of 3 months of interest or more may apply. Discharge fees also range from $300 to $400. [Source]

Moving Costs: After the sale closes, you may also have to pay moving costs for your belongings as a seller.

In total, expect around $25,000 in closing costs on a $500,000 home sale in Ontario – with commissions being the most significant expense.

The Closing Process in Ontario: What to Expect

The closing or settlement process finalizes the real estate transaction, making it official.

Here are key things to expect on closing day for a real estate purchase in Ontario:

• Legal review – The buyer’s and seller’s lawyers will review the final statement of adjustments and closing documents.
• Final walkthrough – The buyer completes a final property walkthrough before closing.
• Exchange of funds – The buyer provides funds for the down payment and closing costs, and the seller receives net sale proceeds.
• Closing and possession – The buyer is provided with keys, property ownership is transferred, and the new mortgage is registered on the title.
• Completion – The new owner takes possession, and the deal is complete!

Closing day can be busy with many documents to review and sign. Leave ample time to complete the closing process with your lawyer. Both real estate lawyers will ensure the transaction follows all legal requirements before releasing the keys.

Tips for Minimizing Closing Costs in Ontario

Here are some tips to keep your closing costs under control:

Shop mortgage rates – Compare rates amongst multiple lenders and brokers. Small rate differences can save thousands long-term.

Negotiate commissions – Discuss options for lower realtor commissions as a seller if amenable.

Watch land transfer thresholds – Structuring offers just below pricing thresholds for higher land transfer tax rates, which can potentially save thousands.

Leverage new housing rebates – First-time home buyers and those purchasing new construction may qualify for rebates and credits.

Sell privately – Forgoing realtor representation can avoid thousands in commission. But you lose out on exposure.

Rent then buy – Consider renting at first to meet residency terms for first-time home buyer incentives.

Do-it-yourself moving – Skip professional movers and move yourself to save on costs.

Ask about discounts – Some lawyers and insurers may offer discounts, especially on bundled services.

Factor costs in early – Improper budgeting for closing fees is a top regret among home buyers. Plan ahead.

With some savvy preparation, you can reduce the sting of closing costs when buying or selling your home.

Explore our guide on Closing Costs for other provinces in Canada

• Closing Costs in Alberta

Key Takeaways on Closing Costs Ontario

• Closing costs apply to both home buyers and sellers in Ontario.
• Typical closing fees range from 1.5% to 4% for buyers and 1% to 3% for sellers.
• Major buyer costs include land transfer taxes, legal fees, and lender disbursements.
• Top seller closing costs are real estate commissions, legal fees, and mortgage penalties.
• Budget and prepare for closing costs well in advance of your closing date.

Professional Guidance for Ontario Home Buyers and Sellers!

This guide covers the key closing costs you can expect during an Ontario property purchase or sale. However, it’s best to connect with professionals to get more accurate estimates tailored to your specific transaction.

Consult with a mortgage broker at Best Mortgage Online who can explain loan-related closing fees to ensure a smoother property transfer in Ontario.

FAQs on Closing Costs Ontario

Article Sources

1. Closing Costs In Ontario