Closing Costs for Buyers

How Much Should You Budget?

As a general rule, buyers in Ontario should budget between 1.5% and 4% of the purchase price for closing costs, on top of their down payment. For a $700,000 purchase, that means setting aside $10,500 to $28,000 in additional cash. In Toronto, where the municipal land transfer tax applies, closing costs run higher and can reach 4% to 5% of the purchase price.

Closing costs are not included in your mortgage. They must be paid from your own funds on or before closing day. Failing to budget for them is one of the most common mistakes first-time buyers make.

Land Transfer Tax

Land transfer tax is typically the single largest closing cost for buyers. In Ontario, the provincial LTT is calculated on a marginal rate system ranging from 0.5% to 2.5% depending on the purchase price. Toronto buyers pay an additional municipal LTT at similar rates. On a $700,000 home in Toronto, the combined LTT is approximately $20,950 before any first-time buyer rebates.

First-time buyers may qualify for rebates of up to $4,000 on the provincial LTT and up to $4,475 on the Toronto municipal LTT, potentially saving up to $8,475. Learn more about eligibility at the Financial Consumer Agency of Canada.

Legal Fees and Disbursements

You will need a real estate lawyer to handle the legal aspects of your purchase. Typical legal fees for a residential purchase in the GTA range from $1,500 to $2,500, plus HST. On top of the base fee, you will pay disbursements, which are the out-of-pocket expenses your lawyer incurs on your behalf. Common disbursements include title searches ($200 to $400), registration fees ($70 to $80 per document), and courier and administrative fees ($100 to $200).

Title Insurance

Title insurance protects you against defects in title, fraud, encroachment issues, and other problems that may not be discovered during a standard title search. Most lenders require it. A residential title insurance policy typically costs $250 to $500 as a one-time premium. It is far less expensive than the alternative of obtaining a full survey, which can cost $1,500 or more.

Home Inspection

A pre-purchase home inspection is highly recommended, though in competitive markets some buyers choose to waive it. A standard home inspection for a typical GTA home costs $400 to $600, depending on the size and age of the property. If you want additional inspections, such as a sewer scope ($200 to $350), mold testing ($300 to $500), or WETT inspection for wood-burning appliances ($250 to $400), those are separate charges.

Appraisal Fee

Your lender may require a property appraisal to confirm the home's value supports the mortgage amount. Some lenders cover this cost themselves, but if you are responsible, expect to pay $300 to $500. For higher-value properties or unique homes, the appraisal fee may be higher.

Mortgage Default Insurance

If your down payment is less than 20% of the purchase price, you are required to purchase mortgage default insurance through CMHC, Sagen, or Canada Guaranty. The premium ranges from 2.8% to 4.0% of the mortgage amount, depending on the size of your down payment. This premium is typically added to your mortgage balance, so you do not need to pay it in cash at closing, but it does increase your total borrowing cost.

• 15% to 19.99% down payment: 2.8% premium
• 10% to 14.99% down payment: 3.1% premium
• 5% to 9.99% down payment: 4.0% premium

Property Tax and Utility Adjustments

On closing day, your lawyer will calculate adjustments for property taxes and utilities that the seller has prepaid beyond the closing date. If the seller has paid property taxes for the full year but you are closing mid-year, you will reimburse the seller for the portion covering your ownership period. These adjustments typically range from a few hundred to a few thousand dollars depending on timing.

Other Potential Costs

• Mortgage broker fee: Usually paid by the lender, but in some cases the buyer pays $1,000 to $2,500
• Estoppel certificate fee (for condos): $100 to $150, usually paid by the seller but sometimes negotiated
• Status certificate review (for condos): $300 to $500 for a lawyer to review it thoroughly
• Moving costs: $1,000 to $3,000 for a local GTA move with professional movers
• Utility hookups and connections: $100 to $300 for transfers and deposits
• Home insurance: First year's premium of $800 to $2,000 may be required before closing

Sample Closing Cost Breakdown

Here is a realistic example for a first-time buyer purchasing a $700,000 home in Toronto with a 10% down payment:

• Land transfer tax (combined, after rebates): approximately $12,475
• Legal fees and disbursements: approximately $2,200
• Title insurance: approximately $350
• Home inspection: approximately $500
• Property tax adjustment: approximately $1,500
• Home insurance: approximately $1,200
• Moving costs: approximately $2,000
• Total estimated closing costs: approximately $20,225