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Closing Costs in Ontario Real Estate

Written by Dan Attana

January 22, 2025

closing costs

Buying a home in Ontario is an exciting milestone, but it comes with associated costs beyond the purchase price. These are known as “closing costs” and can significantly impact your budget.

What are Closing Costs?

Closing costs represent the various fees and expenses incurred during the home buying process that are due at the time of closing. This is the crucial moment when the legal transfer of property ownership officially takes place.   

Think of closing costs as the “finishing touches” on your home purchase. Just like building a house requires more than just the foundation and walls, buying a home involves more than just the purchase price itself.   

Here’s a breakdown:

  • Closing costs are typically borne by the buyer: While some closing costs may be negotiable with the seller, the majority are typically the responsibility of the buyer.   
  • They cover a range of services: These costs cover a wide spectrum of services, including legal fees, taxes, and various administrative tasks necessary to finalize the property transfer.   

Essentially, closing costs encompass all the financial obligations that arise during the final stages of the home buying journey, ensuring a smooth and legally sound transfer of ownership.

Key Closing Costs in Ontario:

  • Closing Costs: Land Transfer Tax:

    • This is a provincial tax imposed by the Ontario government on the purchase price of the property.
    • The amount varies depending on the purchase price and the type of property (residential, commercial, etc.).
    • First-time homebuyers in Ontario may be eligible for a partial or full rebate on the Land Transfer Tax.
  • Closing Costs: Legal Fees:

    • These fees cover the comprehensive services of your real estate lawyer.
    • Key services include:
      • Reviewing the Agreement of Purchase and Sale: Carefully examining the contract to ensure your rights and interests are protected.
      • Conducting title searches: Investigating the property’s history to ensure there are no outstanding claims or encumbrances.
      • Preparing necessary documents: Drafting and preparing various legal documents required for the property transfer.
      • Representing your interests: Advocating for your best interests throughout the entire closing process.
  • Land Registration Fees:

    • These fees are charged by the Land Registry Office for officially registering the transfer of property ownership in your name.
    • This process ensures that you are legally recognized as the new owner of the property.
  • Mortgage Default Insurance (if applicable):

    • If your down payment is less than 20% of the purchase price, you’ll typically need to purchase mortgage default insurance.
    • This insurance protects the lender in case you are unable to make your mortgage payments.
    • Common providers of mortgage default insurance in Canada include the Canada Mortgage and Housing Corporation (CMHC).
  • Property Taxes (prorated):

    • You’ll be responsible for paying property taxes for the portion of the year that you own the property.
    • The seller will typically pay property taxes up to the date of closing, and you will be responsible for the remaining portion of the year.
  • Home Inspection (optional but highly recommended):

    • A professional home inspection can identify potential issues with the property, such as structural problems, electrical issues, or plumbing problems.
    • This valuable information allows you to:
      • Negotiate repairs with the seller.
      • Make an informed decision about whether to proceed with the purchase.
      • Budget for potential future repairs.
  • Appraisal (may be required by lender):

    • An independent appraiser will assess the property’s market value.
    • This appraisal is crucial for the lender to ensure that the property is an adequate security for the loan.
    • It also helps to determine the appropriate loan-to-value ratio.

Other Potential Costs:

  • Title Insurance:

    • This valuable insurance policy protects you against potential claims or disputes regarding the ownership of the property.
    • It acts as a safeguard against unforeseen issues that could arise in the future, such as:
      • Title defects: Errors or discrepancies in the property’s ownership records.
      • Forged documents: Instances where fraudulent documents have been used to claim ownership.
      • Unforeseen liens or claims: Claims against the property that were not previously discovered.
    • While not always mandatory, title insurance provides crucial peace of mind and can protect you from significant financial losses.
  • Survey (if required):

    • A professional land survey may be necessary in certain situations, such as:
      • Boundary disputes: If there are any uncertainties or discrepancies regarding the property boundaries.
      • Construction projects: If you plan to make significant renovations or additions to the property.
      • Fencing disputes: If there are disagreements with neighbors regarding property lines.
    • A survey accurately maps the property boundaries, helping to avoid future disputes and potential legal issues.
  • Closing Costs Include Moving Expenses:

    • Moving expenses encompass the various costs associated with relocating to your new home. These can include:
      • Hiring professional movers: If you opt for professional assistance, the cost will depend on the distance, the amount of furniture, and the level of service required.
      • Renting a moving truck: If you choose to handle the move yourself, you’ll need to rent a suitable truck and potentially other equipment.
      • Packing supplies: Costs associated with purchasing packing materials such as boxes, tape, bubble wrap, and packing peanuts.
      • Storage costs: If you need temporary storage for your belongings during the transition.

These “other potential costs” may not be applicable to every home purchase, but it’s important to be aware of them and factor them into your overall budget.

Tips for Managing Closing Costs:

  • Closing Costs: Budget Carefully:

    • Detailed estimation: Work closely with your real estate agent, lawyer, and lender to obtain detailed estimates of all potential closing costs.
    • Factor them into your overall budget: Include closing costs in your overall budget alongside the purchase price, down payment, and other related expenses.
    • Consider contingencies: Account for potential unexpected costs that may arise during the closing process.
  • Shop Around for Lenders:

    • Compare mortgage rates: Obtain mortgage pre-approvals from multiple lenders to compare interest rates, loan terms, and closing costs.
    • Negotiate with lenders: Don’t hesitate to negotiate with lenders to secure the best possible deal on your mortgage rate and closing costs.
    • Look beyond interest rates: Focus not only on the interest rate, but also on the lender’s overall fees and the terms of the mortgage.
  • Negotiate with the Seller:

    • Seller concessions: In a competitive market, you may be able to negotiate for the seller to cover some of the closing costs.
    • Common seller concessions: These can include paying for a portion of the Land Transfer Tax, covering home inspection costs, or contributing towards closing costs.
    • Strong negotiation skills: Work with your real estate agent to develop a strong negotiation strategy to maximize your chances of securing seller concessions.
  • Get Pre-approved for a Mortgage:

    • Clearer budgeting: Mortgage pre-approval gives you a clear understanding of your borrowing capacity, allowing you to budget more effectively for the entire home buying process.
    • Stronger negotiating position: Pre-approval demonstrates your financial readiness to the seller, strengthening your negotiating position.
    • Reduced stress: Knowing your borrowing power beforehand reduces stress and allows you to make informed decisions throughout the home buying process.

By implementing these tips, you can effectively manage closing costs, minimize unexpected expenses, and secure a more favorable deal on your home purchase.

To buy or sell your home, contact me today at 647-995-3391 or via email at [email protected]. You can also visit my website by clicking here.

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Questions? Call Dan! : 647 995 3391

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