Closing Costs

Closing costs are the list of fees that your lawyer presents to you on the closing date. When buying a new home, there are expenses outside of your Toronto mortgage that you will need to include in your budget.

To help you, we listed the closing costs and created a checklist that you can use to keep track of your expenses. According to CMHC and Genworth, one should have, in addition to the down payment, at least 2% of the purchase price for closing costs. We recommend keeping at least 2.5% just to stay on the safe side. The costs vary from city to city and province to province.

Below you will find a an explanation of all of these costs. Please note that not all of them may or may not apply to your specific situation and that there may be others that apply in your circumstance. Use this as a guideline, and then speak with your lawyer who can provide a more accurate estimate for your situation, since they will be handling the distribution of majority of your closing costs.

Click here to download your Complete Closing Cost Checklist in Adobe PDF format

Land Transfer Tax

This fee is charged to the purchaser when a property changes ownership. This tax is calculated as a percentage on the purchase price and adjusts as the price goes up. This percentage can range from 0.5% to 2.0% of the value of the property (varies by province and municipality). This is generally the largest portion of closing costs on a resale home. In Ontario, first time home buyers who purchase a new home get a refund up to $1725.

See our Land Transfer Tax Calculator and all our Mortgage Tools here.

Home Inspection Fee

A professional inspection of the home, from foundation to the roof, is for the benefit of the buyer and explains why the buyer is responsible for that cost. A typical home inspection can cost in the range of $275 to $500. This inspection will guarantee that you get what you are paying for.

New home buyers can chose if they would like one because these new homes are covered under a builders warranty for the first five years but it’s up to you to make sure that the builder is registered with Tarion and that your home falls under their warranty. When hiring a home inspector, make sure that your using a certified and registered inspector. Also make sure that they have liability insurance, in the case a mistake is made.

Appraisal Fee

The appraisal provides the lenders with a professional opinion of the market value of the property based on personal inspection and comparisons to other properties in the area. This cost is the borrower’s responsibility and it ranges as low as $175 for a drive-by appraisal to as much as $400 for a full appraisal plus G.S.T. The costs vary depending on the size and location of the home.

Legal Costs and Disbursements

A lawyer or notary charges a fee for their professional services involved in drafting the title deed, conducting the various searches, and preparing the mortgage papers. Disbursements are out-of-pocket expenses incurred, such as registrations, searches, supplies as well as other things. Disbursements are charged G.S.T as well.

Mortgage Insurance Application and Processing Fee

On a high-ratio insured mortgage the mortgage insurer charges a fee of $165-$185 for applying and processing the file, as well as appraising the property. On new homes, this fee drops to $75 due to the fact that the property falls under a warranty.

See our Mortgage Insurance Calculator and all our Mortgage Tools here.

Closing Adjustments

You should be prepared to pay the closing adjustments for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date become the purchaser’s responsibility. Your lawyer or notary will let you know what they are once they have completed the various searches.

Land Survey Fee Or Title Insurance Fee

A recent Survey of the property is more often than not, required by the lender. If a recent survey is not available you may have to purchase a new one and that cost ranges from $600 to $900 for a new survey. In lieu of the Survey, most lenders will accept Title Insurance which costs much less and guarantees title of the property for a fee of approximately $225.

Fire Insurance

All mortgage lenders require that fire insurance has been purchased prior to the borrower taking possession of the home. The amount of coverage required must be at least the size of the mortgage or the replacement cost of the home. This cost will vary depending on the property size, extras being insured, type of coverage, as well as the insurance company and the municipality. The cost can vary anywhere from $300-$650 for most properties.

Provincial Sales Tax of 8% (P.S.T.)

If your Toronto mortgage is insured by a mortgage insurer and considered to be a high ratio mortgage (less than 20% down payment), there is P.S.T. charge of 8% in Ontario, payable at closing, on the mortgage insurance fee. While the insurance premium can be added to the mortgage amount, the P.S.T. must be paid at closing. For example, a mortgage that results in a $2,000 fee, will have to pay $160 in Provincial Sales Tax upon closing.

Government Sales Tax of 5% (G.S.T.)

On the purchase of a newly constructed home GST must be paid. Confirm upon purchase who will make the G.S.T payment, you or the builder. If you look at the offer provided, it will say “Plus GST” or “GST Included”, and who the GST new home rebate will apply to. A lot of builders have included this cost into the purchase price so that the buyer does not have to come up with that at closing. Government Sales Tax is also charged on all professional fees.

New Home Warranty

In majority of the provinces, new homes are covered by a new home warranty program. In Ontario, Tarion is the warranty provider for all new homes built by registered builders. The cost to the purchaser for this warranty is approximately $600. If the builder defaults or fails to build to an agreed-upon standard, the fund will repair and finish the deficiencies outstanding.

Estoppel Certificate

Required only if you are purchasing a condo. It outlines a condominium corporation’s financial and legal state of affairs.