A Homebuyer's Guide to Closing Costs

Navigating the final steps of buying a home can feel a bit like crossing the finish line of a marathon—you see the prize within reach, but there’s still one last hill. Closing costs are that hill: essential expenses you must pay before the keys are yours, yet they often surprise even the savviest buyers. Whether you’re a first-timer or moving up the property ladder, understanding exactly what these fees cover—and how to plan for them—will give you the confidence to step into your new home without any unwelcome financial surprises. Let’s shed light on the hidden fees behind that dream front door, so you can focus on what really matters: turning that house into your home.

What Are Closing Costs?

Closing costs are the additional fees and charges you pay when finalizing the purchase of a home, separate from your down payment and mortgage principal. These costs typically range from 1.5 % to 4 % of the purchase price in Ontario, with Toronto buyers often budgeting closer to 2 %–4 % due to municipal levies. Since these expenses cannot usually be rolled into your mortgage, it’s essential to budget for them upfront.

Key Components of Closing Costs

Land Transfer Tax (Provincial and Municipal)

• Ontario Land Transfer Tax (LTT): Calculated on a sliding scale—0.5 % on the first $55,000, 1 % on the next $195,000, 1.5 % on the next $150,000, and 2 % up to $2 million, with 2.5 % above that.
  
  

• Toronto Municipal LTT: In addition to the provincial LTT, the City of Toronto charges its own municipal land transfer tax at identical rates, effectively doubling the land transfer portion of your closing costs.
  
  

Legal Fees and Disbursements

You’ll need a real estate lawyer to handle the paperwork, conduct title searches, register your mortgage, and facilitate the transfer of funds. Legal fees in Toronto generally range from $1,500 to $2,500, plus disbursements for searches and registrations.

Home Inspection Fee

A professional home inspection helps uncover any hidden defects before closing. Typical inspection costs in the GTA run from $350 to $600, depending on home size, age, and location.

Title Insurance

Title insurance protects you against title defects, fraud, and survey issues. This one-time premium usually costs between $250 and $400 in Ontario, often bundled with legal fees.

Mortgage Default Insurance (CMHC, Genworth, Canada Guaranty)

If your down payment is less than 20 %, you’ll pay mortgage default insurance premiums. While these premiums are typically added to your mortgage, you may also owe 8 % provincial sales tax (PST) on the insurance amount at closing in Ontario.

Adjustments for Property Taxes and Utilities

Sellers often prepay property taxes and utilities. On closing day, you reimburse them for the prorated share of those costs, which can amount to hundreds or even thousands of dollars, depending on timing and property value.

Other Potential Costs

• Appraisal Fee: $300–$500 (sometimes covered by the lender).
  
  

• Survey or Real Property Report Updates: $300–$600, if required.
  
  

• Moving Costs: $500–$2,000, based on distance and services.
  
  

• Utilities Hook-Up Fees: Varies by provider.
  
  

First-Time Homebuyer Incentives and Rebates

Ontario Land Transfer Tax Rebate

Qualifying first-time buyers in Ontario may reclaim up to $4,000 of the provincial LTT. In Toronto, you can additionally claim up to $4,475 against the municipal LTT, effectively eliminating this cost for many first-time purchasers. 

To qualify, you must:

• Be at least 18 years old
  
  

• Never have owned a home anywhere in the world
  
  

• Occupy the property as your principal residence within nine months of closing

To apply, submit the Ontario Land Transfer Tax Refund Affidavit alongside your transfer documents, or claim online through the electronic land registration system.

First-Time Home Buyers’ Tax Credit (HBTC)

Receive a non-refundable tax credit worth up to $750 (based on a $5,000 credit at 15 %) to help offset legal and other closing fees.

GST/HST New Housing Rebate

If you’re buying a newly built home or substantially renovating an existing one, you may recover a portion of the GST/HST paid—up to $6,300 on a home priced under $450,000, with a phased rebate up to $6,300 for homes up to $550,000.

Budgeting for Your Closing Costs

1. Estimate Using a Percentage Rule of Thumb: Multiply your expected purchase price by 2 %–4 % to arrive at a ballpark figure.
   
   

2. Obtain Quotes Upfront: Ask your lawyer for an estimate of legal fees and disbursements, and schedule a home inspection to lock in the cost.
   
   

3. Set Aside Rebates and Credits: If you qualify as a first-time buyer, earmark the LTT rebate and HBTC to reduce your cash-on-hand requirement.
   
   

4. Include Miscellaneous Expenses: Don’t forget moving costs, utility hook-ups, and any survey updates you might need.
   
   

5. Maintain a Buffer: Aim for an extra 10 % cushion beyond your estimate to cover unexpected adjustments or prorations.
   
   

Final Thoughts

Closing costs needn’t be a source of stress when you know what to expect and plan accordingly. By familiarizing yourself with land transfer taxes, legal fees, inspections, insurance, and prorated adjustments, you can budget confidently and avoid last-minute surprises on closing day. Take advantage of first-time buyer rebates, tax credits, and HST/GST rebates to keep more money in your pocket, and always build in a small buffer for unexpected expenses.

When you’re ready to turn the key on your new home in Toronto or the GTA, let The Johnson Team guide you every step of the way. With unparalleled market knowledge, creative marketing strategies, and a commitment to your individual needs, our experts will streamline the process—from securing financing to negotiating the best possible terms—at no cost to you as a buyer.

If you’re ready to start house hunting, contact The Johnson Team to begin working with an agent right away.