Key takeaways
- Lenders often want to see about 1.5% of the purchase price set aside for closing costs, on top of your down payment.
- Ontario land transfer tax is usually the largest closing cost; eligible first-time buyers can get a refund of up to $4,000.
- Homes in Toronto also pay a municipal land transfer tax, with a separate first-time buyer rebate.
- With less than 20% down, Ontario charges 8% provincial sales tax on the mortgage insurance premium, payable at closing.
- Ask your lawyer for a closing cost estimate early so there are no surprises.
When you are saving for your first home, the down payment gets most of the attention. But on closing day you also need cash for closing costs, and in Ontario these can add up to thousands of dollars.
Many lenders want to see that you have about 1.5% of the purchase price available for closing costs in addition to your down payment. Here is what that money typically covers.
How much is land transfer tax in Ontario?
Ontario land transfer tax is charged on the purchase price in tiers and is usually the biggest closing cost. Eligible first-time buyers can receive a refund of up to $4,000 of the provincial tax, which is often claimed by your lawyer at registration.
If the home is in the City of Toronto, there is also a municipal land transfer tax, roughly matching the provincial amount, with a separate rebate for eligible first-time buyers. Homes in Mississauga, Brampton and the rest of Ontario pay only the provincial tax.
What other closing costs should I expect?
| Cost | What it is |
|---|---|
| Legal fees and disbursements | Your real estate lawyer's fee plus searches, registration and other costs. |
| Title insurance | Protects against certain title problems; usually arranged by your lawyer. |
| Adjustments | Your share of property tax, utilities or condo fees the seller already prepaid. |
| Home inspection | Optional but recommended for resale homes. |
| Appraisal | Sometimes required by the lender; may be covered. |
| PST on mortgage insurance | 8% Ontario sales tax on the default insurance premium when you put less than 20% down. It cannot be added to the mortgage. |
| Moving and setup | Movers, utility connections, basic furniture and home insurance. |
Are closing costs different for new construction?
Yes, often. New-build purchases can include extra charges, such as development charges, utility connection fees and HST adjustments, depending on your agreement. Have your lawyer review the agreement of purchase and sale early so you know what applies.
How to prepare
- Get pre-approved so you know your price range and how much cash you need.
- Ask your lawyer for an estimate of fees, disbursements and land transfer tax for your price range.
- Keep closing funds in your account with a clear history, just like your down payment.
- Check whether you qualify as a first-time buyer for land transfer tax refunds.
- Leave a buffer for moving and the first few weeks in your new home.
Frequently asked questions
How much should I budget for closing costs in Ontario?
Do first-time buyers pay land transfer tax in Ontario?
Can I add closing costs to my mortgage?
Sources
- Land transfer tax refunds for first-time homebuyers – Government of Ontario
- Municipal Land Transfer Tax rebate opportunities – City of Toronto
Sanmeet Singh
I am licensed in Ontario and help buyers and homeowners anywhere in the province, from my Mississauga office or by phone and video, in English, Hindi and Punjabi. More about me →