You’ve set a goal, managed your spending and saved the down payment for your home in the GTA. How exciting! Now you’re all set to buy a home. But, wait! What are all these closing costs you keep hearing about and how much more should you be setting aside for your Toronto home purchase? Fear not! We’ve included the most important details below so you know what to expect and can plan accordingly.

This article is a guest post written by Nesto.

Key Takeaways:

  • Closing costs are typically 3-5% of the home’s purchase price, but it’s always better to save more money than you think you’ll need
  • Land transfer tax is one of the largest closing cost fees. The amount you pay is based on the purchase price of your home and typically only applies to resale properties
  • You may not have to pay all of the closing costs listed in the article, especially if you’re a first-time homebuyer as rebates are available

What are closing costs?

Closing costs’ is a generalized term that refers to a large variety of different fees and charges associated with the completion of your mortgage deal, including all legal and administrative expenses you’ll be responsible for paying leading up to, or on, your home’s closing date.

The main reason it’s so important to include these costs in your homeownership budget is because, in most cases, these added expenses can’t simply be rolled into your mortgage payments.

How much are typical closing costs?

Closing costs in Toronto range depending on the specific property you plan to purchase but, as a safe estimate, set aside 5% of the purchase price as a buffer to cover these expenses. They typically amount to anywhere from 3-5% of the home’s purchase price, but it’s always better to save more money than you think you’ll need. Any extra funds can be reallocated to help furnish and decorate your new home, or put aside for future maintenance costs or landscaping. There really is no such thing as saving too much.

Tip: Using online calculators can be helpful for figuring out closing costs

Here are some of the most popular closing fees you can expect to pay:

  • Land Transfer Tax (provincial and municipal, where applicable) – This is one of the largest fees associated with the closing of your home. Representing a one-time payment, the land transfer tax is paid by the purchaser when the property is transferred from the seller. The amount you pay is based on the purchase price of your home and typically only applies to resale properties. If you buy in Toronto, you’ll have to pay both the Toronto and Ontario land transfer taxes. But, if you’re a first-time homebuyer, you may be eligible for a land transfer tax rebate.
  • HST/GST – Tax is only charged on new homes, and doesn’t affect homes priced at less than $400,000. Even homes that exceed this price threshold, however, are only taxed on the portion above $400,000. But, you may be eligible for a rebate – both federal and provincial – in some circumstances. Certain conditions may apply so it’s always best to check in with your lawyer/notary for more detailed information.
  • Appraisal Fee – An appraisal is an unbiased estimate on the value of your home requested by the lender and carried out by a professional real estate appraiser. It certifies the property’s resale value to the lender in case you default on your mortgage - the cost is typically $300-$500.
  • Legal Fees & Disbursements – Your lawyer/notary will charge you a fee for drawing up the mortgage and conveyance of title. The amount of the fee will depend on the professional you use but the typical cost is $800-$1,500.
  • Survey – If you’re purchasing a single-family home, you’ll need to provide your lender with a survey certificate showing where the property sits within the property lines. A survey will cost approximately $750-$1,000, but the lender will often accept a copy of an existing survey, so be sure to inquire about this.
  • Interest Adjustments – You’ll need to pay interest on any gap between the closing date of the purchase and the first payment date of the mortgage. You can avoid an interest adjustment by scheduling your first mortgage payment exactly one payment period after your closing date.
  • Statement of Adjustments – Your lawyer/notary will calculate and prepare a statement of adjustments for your portion owing on utilities, property taxes and other bills based on where your closing date falls within the month/payment cycle. As some owners prepay these services, the adjustment could be quite costly.
  • Title Insurance – Most lenders require title insurance to protect against losses in the event of a property ownership dispute. This is purchased through your lawyer/notary and costs approximately $200-300.
  • Home Inspection – A home inspection is a wise investment, as a professional will offer an objective visual examination of the physical structure and systems within a house. The cost of a home inspection ranges between $350-600.

How much money do you need on closing day across the GTA?

There’s no set figure for closing costs, since it depends on the specific property, taking into account such things as purchase price, location (you may need to pay extra land transfer taxes, for instance, when buying in Toronto) and all the other costs outlined above.

Mortgage loan insurance

For many people, saving for a down payment is difficult. While it’s recommended that you put down as much as possible to reduce your mortgage amount, the minimum requirement across Canada is 5% for the first $500,000 and 10% for any portion above that threshold up to $1,000,000, where the down payment required is at least 20% If your down payment is less than 20%, you’ll be required to obtain mortgage default insurance (often referred to as CMHC Insurance, although it’s also available through private insurers Canada Guaranty and Sagen), which protects your mortgage lender should you be unable to make your payments.

Mortgage default insurance is calculated as a percentage of the loan and is based on the size of your down payment. The higher the percentage of the total home purchase price and amount that you borrow, the higher percentage you’ll pay in insurance (ranging between 2.8%-4% of the total mortgage amount).

Mortgage insurance is payable upon closing, or it can be rolled into your monthly mortgage payments. This latter option makes it subject to interest, so it’s important to understand the total cost for each option before making a decision.

Land transfer tax

Land transfer tax (LTT) is one of the largest fees associated with the closing of your home and is often overlooked when calculating your total purchase amount. LTT is paid by homebuyers to the province when the ownership of the home or property is transferred from the seller to the buyer. And if you’re buying in Toronto, you may also be required to pay a municipal land transfer tax.

The LTT payment is typically arranged through your lawyer - it’s an upfront fee that can’t be included in your mortgage payment, so it’s extremely important that you factor in this cost when establishing your overall home buying budget. First-time homebuyers may be eligible for a refund of all, or part of the land transfer tax (both provincial and municipal) so be sure to check with your lawyer/notary.

How can a buyer save on closing costs?

You may not have to pay all of the closing costs listed above, especially if you’re a first-time homebuyer. Your mortgage professional and lawyer/notary will provide a complete rundown of all costs as soon as your mortgage is approved, and suggest any available rebates to help you save as much money as possible.

HST/GST is only charged on new builds so, if you’re purchasing a resale home, you won’t have to worry about this expense. Also worth noting, if you’re buying a new home priced less than $400,000, you won’t have to pay tax either.

In certain circumstances, depending on the specific property, you may not have to pay for a survey if the lender will accept an existing one.

You won’t face an interest adjustment fee if you schedule your first mortgage payment exactly one payment period after your home’s closing date. And, finally, you can avoid paying mortgage default insurance premiums altogether by making at least a 20% down payment when buying your home.

How Dwelly can help you save thousands on your closing costs

At Dwelly, we implement a buyer’s rebate - we essentially give you half of our commission back in return for buying with Dwelly. As a buyer, your typical agent’s commission of 2.5% is paid out by the seller; upon receiving it, we split it in half and give you (the buyer) 50%.

Dwelly believes in involving buyers in their home buying process, from search to close. Our streamlined, tech-enabled process gives you the ability to search on your own, use our chat to book showings, and apply and submit offers online. Since you have a more hands-on role in your home buying process with Dwelly, you make things smoother and faster for us.

Long story short, when you buy with Dwelly, based on the average home price in the Greater Toronto Area, you can save over $13,000 and a minimum of $6,000 on your home purchase.*

The thousands of dollars you save when buying with Dwelly can go towards recovering your closing costs, making it easier for you to cover unexpected expenses associated with buying a home in Toronto.


*Terms and conditions apply to the Dwelly Home Buyer Rebate