Closing Cost Calculator Ontario: What Your Estimate Leaves Out

You typed a purchase price into a closing cost calculator and got a number. It looked manageable, but you suspect it is not the whole story. That instinct is usually right. Calculators are good at the parts that follow a formula and weak on the parts that depend on your particular deal.

This article explains what a typical Ontario estimate covers, what tends to be left out, and how to turn a rough figure into a working budget. It is general information, not advice on your file, so use it to ask better questions of your lawyer.

What most calculators actually cover

The core of almost every Ontario closing cost calculator is land transfer tax. In Ontario, the person who tenders the conveyance for registration pays the tax on the value of the consideration, and it is payable when the conveyance is tendered or before, which means on closing through the buyer's lawyer.

The provincial rates for agreements after November 14, 2016 are 0.5% up to $55,000, 1.0% from $55,000 to $250,000, 1.5% from $250,000 to $400,000 and 2.0% above $400,000, plus 2.5% on the portion above $2,000,000 where the land has one or two single-family residences. To estimate your own provincial tax, apply each rate to the part of your price that falls in that band and add the results; your lawyer can confirm the exact figure.

Many calculators also show the first-time buyer refund. It is a maximum of $4,000, and it applies to a buyer who is 18 or older, will occupy the home as a principal residence within nine months, has never owned an eligible home anywhere in the world, and is a Canadian citizen or permanent resident for agreements after November 14, 2016. A spouse's past ownership counts against you while you are married. The claim must be made within 18 months of registration.

What a quick estimate often leaves out

The items below vary by property and by deal, which is why a simple calculator often skips them or uses a placeholder. Ask your lawyer for each one.

• Legal fees and HST: HST at 13% applies to taxable services connected with a sale, such as legal fees, even though it does not apply to the price of a typical resale home.
• Title insurance: residential title insurance can be bought through a lawyer, a title insurance company or an agent or broker.
• Registry and search charges: the Province publishes fees for copies of parcel registers and documents.
• Condominium status certificate: if you are buying a condo, the corporation may charge a fee that cannot exceed $100 including all applicable taxes.
• Adjustments: closing adjustments depend on your agreement and on what has already been paid, so ask your lawyer for an estimate.
• Municipal and other taxes: Toronto, for example, has its own municipal land transfer tax, and some buyers face non-resident taxes. Whether any of these apply to you depends on the facts.

Also remember that a calculator usually cannot know about moving costs, new locks, utility set-up, or repairs you plan to make right away. These are real cash needs even though they are not closing costs in the strict sense.

Buyer costs and seller costs are different

A common mistake is to use a buyer's calculator when you are selling. Land transfer tax is paid only by the buyer tendering the conveyance. A seller does not pay it on a sale. A seller's costs are instead commission, HST on commission, legal fees and disbursements, any mortgage payout or penalty, and adjustments.

The seller's hidden number: the mortgage payout

Sellers often underestimate this line. Paying off an entire mortgage early, including because you sell the home, can trigger a prepayment penalty, and porting the mortgage is only an option if you are buying another home and your lender allows it.

A prepayment penalty is usually the higher of three months' interest on what you still owe or the interest rate differential. As an example, on $200,000 at 6% with 36 months left and a posted rate of 4%, three months' interest is $3,000 but the differential is $12,000, so the penalty would be $12,000, possibly plus an administration fee. Your own mortgage contract and lender set the actual figure, so request a payout statement early.

How to build a realistic budget

• Calculate land transfer tax for your price and add any municipal tax that applies to your city.
• Subtract the first-time buyer refund only if you clearly meet every condition, and remember it is claimed after registration.
• Ask your lawyer for an estimate that lists legal fees, HST, title insurance and disbursements separately.
• If buying a condo, request the status certificate early and budget for its fee.
• Add a cushion for adjustments, because the exact figure is only known near closing.
• If selling, get a written mortgage payout figure and ask your lender about penalties and porting.
• Set aside separate money for moving and immediate repairs.

Once you have an offer in hand, send the agreement to your lawyer before you rely on any calculator. The lawyer can prepare a statement of adjustments and a closing estimate based on the real terms.

Frequently asked questions