How Much Does It Cost to Sell a Home in Ontario? Net Proceeds

Most sellers start with the same question: after everything is paid, how much money actually lands in my account? The sale price is only the starting point. Several charges come off it before you see a cheque, and the biggest ones are usually your real estate commission, your mortgage payout and your legal fees.

This article walks through the costs that come off a sale, from top to bottom. Use your own figures from your listing agreement, mortgage statement and legal fee quote, and have your lawyer prepare a statement of adjustments for the real number.

What you do not pay as a seller

Land transfer tax is paid by the buyer who tenders the conveyance for registration. A seller does not pay land transfer tax on a sale. Your costs are instead commission, HST on commission, legal fees and disbursements, any mortgage payout or penalty, and adjustments.

You also generally do not charge HST on the sale price of a typical resale. Sales of used owner-occupied homes by individuals are usually exempt from GST/HST, and only homes sold by builders are taxable. There are exceptions, such as a seller who claimed input tax credits on the purchase or improvements, and a home that is mostly non-residential is treated as two properties. If your property is unusual, ask a lawyer or accountant.

How the pieces fit together

Start with the sale price, then take off the commission agreed in your listing agreement, HST on that commission, your legal fees and the HST on them, and your mortgage payout. HST of 13% applies to taxable services connected with a sale such as commissions and legal fees.

What is left is before adjustments for things like property taxes and utilities. Your lawyer's statement of adjustments is the figure to rely on.

The mortgage penalty can change the answer

Paying off an entire mortgage early, including because you sell the home, can trigger a prepayment penalty. A penalty is usually the higher of three months' interest on what you still owe or the interest rate differential (IRD). Lenders usually use the IRD when your rate is higher than current rates and you signed less than five years ago.

The Financial Consumer Agency of Canada gives this example: on $200,000 at 6% with 36 months left and a posted rate of 4%, three months' interest is $3,000 and the IRD is $12,000, so the penalty is $12,000, plus possibly an administration fee. Your own penalty depends on your mortgage contract, so ask your lender for a written payout figure.

Porting your mortgage to a new home is only an option if you are buying another home, and you should ask your lender whether it is available. Federal and Ontario law also contain rules for mortgages with terms longer than five years, where the borrower may pay the amount due plus three months' interest after five years. Those rules do not apply to every borrower, such as corporations, so confirm with your lawyer.

Other items that may reduce your proceeds

• If you sell a condominium, the corporation may charge up to $100, including taxes, for a status certificate and required material.
• Copies of title documents from the land registry carry small fees, for example $36.50 for a parcel register copy and $3.39 per document to view and copy an instrument.
• If the property is tenanted, a buyer who takes title steps into the landlord's role under the Residential Tenancies Act, 2006, so rent deposit handling should be raised with your lawyer.
• If you are selling as an estate trustee, Estate Administration Tax may already have been paid on the estate certificate application.

Tax reporting after the sale

Selling your principal residence still has to be reported. From the 2016 tax year, you designate the home on Schedule 3 of your T1 return, and for sales from 2017 you also complete Form T2091. A late designation penalty is the lesser of $8,000 or $100 per complete month from the original due date. An accountant can confirm whether any gain is taxable in your situation.

What to do next

• Ask your lender for a written mortgage payout statement, including any penalty.
• Read the commission section of your listing agreement and add 13% HST to it.
• Ask a real estate lawyer for a written fee quote that shows disbursements and HST.
• If you own a condominium, ask the corporation what it will charge for a status certificate.
• Set aside the paperwork you will need to report the sale on your tax return.

Frequently asked questions