Closing costs in Ontario: land transfer tax and the rest

Closing costs are the cash you need on closing day on top of your down payment. In Ontario, the largest one by far is provincial land transfer tax: $8,475 on a $600,000 home, for example, before any first-time buyer refund. The rest are legal fees and disbursements, title insurance, inspections, the 8% provincial sales tax on any mortgage insurance premium, adjustments for prepaid property tax, and moving.

Orillia, Severn, Oro-Medonte, Ramara, Barrie and Gravenhurst have no municipal land transfer tax; that is a City of Toronto charge. Use the land transfer tax calculator for your exact figure, and read on for every line item.

How much is land transfer tax in Ontario?

Land transfer tax is charged in brackets, like income tax. Each rate applies only to the part of the price that falls in that bracket. For a property with one or two single-family residences, the Ontario Ministry of Finance sets these rates:

Portion of the price	Rate
Up to and including $55,000	0.5%
$55,000.01 to $250,000	1.0%
$250,000.01 to $400,000	1.5%
$400,000.01 to $2,000,000	2.0%
Over $2,000,000	2.5%

Worked examples

Purchase price	Land transfer tax	After the maximum first-time buyer refund
$400,000	$4,475	$475
$500,000	$6,475	$2,475
$600,000	$8,475	$4,475
$700,000	$10,475	$6,475
$800,000	$12,475	$8,475
$1,000,000	$16,475	$12,475

Here is how the $600,000 figure is built: 0.5% of the first $55,000 is $275; 1% of the next $195,000 is $1,950; 1.5% of the next $150,000 is $2,250; and 2% of the last $200,000 is $4,000. Total: $8,475.

The tax is calculated on the value of the consideration, which for a typical purchase is the price. Your lawyer pays it when they register the transfer on closing day. It cannot be added to your mortgage.

The first-time buyer refund

If you qualify as a first-time buyer, you can get up to $4,000 back. You must be at least 18, a Canadian citizen or permanent resident, never have owned a home anywhere in the world, and move in within nine months. Your lawyer usually claims it on closing; otherwise you have 18 months after registration to apply. See first-time buyers in Ontario for the full rules.

Non-Resident Speculation Tax

Foreign nationals, foreign corporations and taxable trustees buying residential property anywhere in Ontario pay a Non-Resident Speculation Tax of 25%, in addition to the regular land transfer tax. There are limited exemptions and rebates. If this could apply to you or anyone on title, speak with your lawyer before you make an offer.

What do real estate lawyers charge to close a purchase?

You need a real estate lawyer to close a purchase in Ontario. They search title, review the agreement, arrange title insurance, handle your mortgage documents, collect and pay the land transfer tax, register the transfer and give you the keys.

The bill has three parts: the legal fee, disbursements (registration costs, searches, courier and similar), and HST at 13% on the taxable parts. Fees vary by firm and by complexity. A rural purchase with a well, septic, a private road or a shoreline question, or a property bought with several lenders, takes more work than a simple in-town purchase. Get two or three written, all-in quotes early, and ask what is not included.

What is title insurance and do I need it?

Title insurance is a policy that protects you, and usually your lender, against certain defects in the property's title, such as title fraud and some problems a search or survey might have caught. Coverage differs between policies, and many lenders ask for it, so most lawyers arrange it as part of the closing. The premium is a one-time cost and depends on the price and the policy. Ask your lawyer what the policy covers and, for rural property, whether there are exclusions for things like encroachments or water frontage.

Inspections and appraisal

Home inspection

The Government of Ontario says home inspections typically cost $350 to $600, and more depending on the size and condition of the home. An inspection is not a pass or fail test and does not check zoning or building code compliance. Ontario does not currently have mandatory requirements for home inspectors, and they are not required by law to carry insurance, so ask about qualifications and insurance before you hire one.

Rural inspections and tests

Rural homes need more than a standard inspection. Budget for a septic inspection, water quality and quantity testing on the well, and possibly a woodstove inspection. See septic inspections, wells and water testing and insurance, woodstoves and oil tanks.

Appraisal

Your lender may order an appraisal to confirm the property supports the mortgage. Some lenders cover it, and some pass the cost to you. Ask when you get pre-approved.

Status certificate for condos

For a resale condo, you can request a status certificate, which includes the condo declaration, by-laws and rules. Your lawyer should review it during your conditional period. There is a fee to obtain it.

What does mortgage insurance add to closing costs?

If your down payment is under 20%, you need mortgage loan insurance. The premium itself can be added to your mortgage, but Ontario applies provincial sales tax to the premium, and that tax cannot be added to the mortgage. It is due in cash on closing.

Ontario's retail sales tax rate on insurance premiums is 8%. For example, on a $475,000 mortgage with 5% down, CMHC's 4.00% premium is $19,000, and the 8% tax on it is $1,520 due on closing. Your lender will confirm the exact figures for your mortgage.

What are closing adjustments?

Adjustments make sure you and the seller each pay for the days you own the home.

• Property tax. If the seller has already paid the year's property tax, you reimburse them for the days after closing. If they are behind, the arrears come off what you owe them.
• Utilities and fuel. Water bills, and sometimes heating oil or propane left in the tank, can be adjusted on closing if the agreement says so.
• Condo fees. For a condo, the month's common fees are split by the day.

Adjustments appear on your lawyer's statement of adjustments a few days before closing. They are a real cash cost, especially when you close later in a year in which taxes have been prepaid.

Other costs to budget for

Item	When	Notes
Deposit	When your offer is accepted	Part of your down payment, not an extra cost, but it needs to be ready in cash
Home insurance	Before closing	Your lender will want proof of coverage; ask about woodstoves, oil tanks and distance to a fire hall
Survey	Before or during conditions	If the seller does not have one, or for rural and waterfront lots
Moving	Around closing	Book early in spring and summer
Utility hook-ups	After closing	Hydro, internet, propane or oil accounts
Immediate repairs	After closing	Anything the inspection flagged

A simple closing cost checklist

A few items are easy to miss until the statement of adjustments arrives:

• Rental contracts. Ask whether the water heater, furnace, air conditioner or water softener is rented. Rental agreements usually carry over to the buyer, and buying one out is an extra cost.
• Fuel and propane. On rural homes, find out whether the propane tank is owned or leased, and whether you will be paying the seller for oil or propane left in the tank.
• The property tax adjustment. If the seller has prepaid the year's taxes, you reimburse them on closing, in cash.
• Mortgage insurance tax. The 8% tax on the premium is paid in cash at closing and cannot be added to the mortgage.

How Jordan can help

Before you make an offer, Jordan can help you estimate your closing costs on the specific property, including whether it is on municipal services or septic and well, and which inspections to budget for. He can also refer you to local lawyers, inspectors and lenders so you can get quotes early. Call 705-345-0797.