If you read nothing else
- Closing costs in Canada usually range from 1.5% to 4% of the purchase price, on top of your down payment.
- Land Transfer Tax is usually the largest closing cost. Toronto buyers pay it twice, with both provincial and municipal LTT.
- First-time buyers may qualify for rebates on the Land Transfer Tax that can meaningfully reduce the total.
- Legal fees, title insurance, and home inspection costs are separate from the LTT and add up quickly.
What Are Closing Costs?
Daniel is a 29-year-old living in Hamilton, Ontario. He graduated three years ago and has been saving since then. He finally has enough for a 10% down payment on a $550,000 home. After closing the deal, his broker mentioned closing costs, but Daniel assumed those were just legal fees.
Closing costs are the additional expenses due on the day you take ownership of a property, separate from your down payment and mortgage.
How Much Should You Budget?
The general rule in Canada is 1.5% to 4% of the purchase price. For Daniel's $550,000 home, that is roughly $8,250 to $22,000. The range varies depending on the province, whether the buyer is a first-time buyer, and the specific costs involved.
1.5% to 4%
The typical closing cost range in Canada as a percentage of the purchase price, on top of the down payment.
What Is Actually Included in Closing Costs?
Here is what Daniel needs to account for:
Land Transfer Tax
LTT is a one-time tax paid when you purchase a property, calculated on a tiered rate based on the purchase price. In Ontario, buyers pay the provincial LTT. Buyers in the City of Toronto also pay an additional Toronto Municipal LTT, effectively doubling the cost. First-time buyers may qualify for a rebate that significantly reduces or eliminates part of the tax.
The remaining closing costs to budget for are legal fees and disbursements, typically $1,200 to $2,500 plus tax; title insurance; a home inspection if not already completed; mortgage default insurance if your down payment is under 20%; and adjustments for any prepaid expenses the seller has already paid, such as property taxes or condo fees, covering the period after you take ownership.
If Daniel's down payment is less than 20% of the purchase price, he is required to purchase mortgage default insurance.
Are There Rebates for First-Time Buyers?
First-time buyers like Daniel may qualify for a rebate on the provincial land transfer tax up to a certain amount, and a separate rebate on the Toronto municipal land transfer tax if buying in the city. Rebate amounts and eligibility conditions can change, so Daniel should confirm the current figures with a lawyer or broker before closing.
When to Talk to a Mortgage Broker
A broker can give Daniel a realistic estimate of his total closing costs based on his specific situation, help him understand which rebates he qualifies for, and make sure there are no surprises on closing day. That conversation should happen early, not the day before closing.
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