· 7 min read
The Hidden Costs of Buying a Home in Ontario
Budget for the down payment and you are maybe eighty percent of the way there. The rest arrives in the last two weeks.
Land transfer tax is the big one
On an $850,000 purchase in Ontario, land transfer tax is $13,475. Buy inside the City of Toronto and a municipal land transfer tax of the same amount lands on top — $26,950 in total. First-time buyers get up to $4,000 back provincially and up to $4,475 in Toronto, but the balance is payable in cash on closing and cannot be added to your mortgage.
This is the single most common reason a first-time buyer arrives at their lawyer's office short. Work it out before you make an offer, not after.
Legal fees and disbursements
Budget $1,800 to $2,500 for a straightforward purchase. That covers the lawyer's fee, title search, registration and title insurance. Anything unusual on title costs more.
Home inspection and appraisal
An inspection runs $400 to $700 and is worth every dollar. An appraisal, $400 to $600, is ordered by the lender but frequently charged to you — though on many insured purchases the lender absorbs it.
The CMHC premium and the PST on it
Under 20% down, mortgage insurance costs roughly 2.8% to 4% of the loan and is added to your mortgage balance. What surprises people is that in Ontario the provincial sales tax on that premium is not financed — it is payable in cash on closing. On a $700,000 mortgage at 90% loan-to-value, that is around $1,700 out of pocket.
Adjustments
If the seller prepaid property taxes, utilities or condo fees beyond the closing date, you reimburse them for the portion covering your ownership. On a spring closing with taxes paid for the year, this can be several thousand dollars.
The ones after you get the keys
- Moving costs: $1,000 to $3,000 for a local move with professionals.
- Utility hookups and deposits, particularly if you have no service history.
- Home insurance, which the lender requires proof of before funding.
- Immediate repairs the inspection flagged.
- Furnishing and window coverings for rooms you did not have before.
A realistic rule of thumb
Set aside 3% to 4% of the purchase price for closing costs in Ontario, and closer to 5% inside Toronto because of the second land transfer tax. On an $850,000 purchase that is $25,000 to $42,000 on top of your down payment. Anyone who tells you 1.5% has not bought in Toronto lately.
More reading
Why Self-Employed Canadians Struggle to Get a Mortgage — and How to Fix It
Self-employed in Ontario? Your write-offs are working against you at the bank. Here is exactly why, and which programs solve it.
Read →
How Rising Interest Rates Change the Refinancing Maths
When rates rise, refinancing stops being about the rate and starts being about cash flow. Here is how to tell whether it still makes sense.
Read →Talk to a broker