Seller Closing Costs in Ontario: What Comes Out of Your Sale

When you sell a home in Ontario, the price on the agreement is not what you take home. Several costs come out of your proceeds at closing, and some of them depend on your mortgage contract and your own situation.

This article walks through the usual costs, then the tax issues that can arise on a sale. Your own figures will depend on your agreement, your lender and your facts, so treat this as a guide to what to ask about.

The main costs sellers pay

Sellers' costs include legal fees (including preparing the statement of adjustments) and a mortgage discharge fee. They may also include realtor commission, mortgage prepayment penalties, moving costs, staging fees, repairs and cleaning.

Commission, the deposit and HST

A service related to real property in Ontario, such as a commission, is subject to HST at the Ontario rate of 13%. Ask whether the commission you agreed to is quoted before or after HST.

When a brokerage holds the buyer's deposit in trust, it first deducts the commission owing. The balance owing to the seller may be released only when the transaction is completed, or with the mutual written consent of both parties. So the deposit does not simply arrive in your hands before closing.

Discharging your mortgage

If your mortgage is paid out from the sale, expect a mortgage discharge fee among your selling costs, and if the lender cannot be found or a proper discharge cannot be obtained without undue delay, the court may allow the amount due to be paid into court and order the mortgage discharged. Registering an instrument electronically, such as a discharge of charge, costs $85.00 effective November 3, 2025. Your lender may also charge its own discharge fee. That fee depends on your mortgage contract, so check your paperwork or ask the lender.

Lenders usually charge a prepayment penalty equal to the higher of three months' interest on the outstanding balance or the interest rate differential (IRD). In the Financial Consumer Agency of Canada's example of $200,000 at 6% with 36 months left, three months' interest is $3,000 and the IRD is $12,000. Federally regulated lenders must explain how they calculate the penalty.

There is an exception for long mortgages. Under the Interest Act, s. 10(1), if a mortgage is not payable until more than five years after its date, the borrower can pay it off at any time after five years by paying the principal and interest owing plus three months' further interest in lieu of notice. This does not apply to a mortgage given by a corporation (s. 10(2)), and the parallel Ontario rule in the Mortgages Act, s. 18, has the same corporate exception.

Tax issues when you sell

If a home was solely your principal residence for every year you owned it, no tax is payable on the gain. You must still report the sale and designate the home on Schedule 3 and Form T2091(IND), and the CRA allows the exemption only if the designation is reported on your return.

• Families: a family unit can designate only one home as its principal residence for each year, for 1982 and later years.
• Cottages and second properties: a property not designated as your principal residence is not exempt, and the gain is reported as a capital gain.
• Rental or business use: if part of the home earned income, the price and cost are split, and the gain on the income-producing part goes on line 13800 of Schedule 3.
• Large lots: land included with the residence is usually limited to half a hectare (1.24 acres), unless you show more is needed to use and enjoy the home.

The flipping rule is another exception. For sales on or after January 1, 2023, a home owned for less than 365 consecutive days is a flipped property. The profit is business income, the principal residence exemption does not apply, and any loss is deemed nil. The rule does not apply if the sale results from events such as a death, a related person joining the household, a marriage or common-law breakdown with at least 90 days of separation, a threat to personal safety, serious illness or disability, involuntary job loss, an eligible relocation, insolvency, or destruction or expropriation of the property.

Non-resident sellers

A non-resident who sells taxable Canadian property, such as Ontario real estate, must notify the CRA on Form T2062 within 10 days of the sale. Late notice carries a penalty of $25 a day, with a minimum of $100 and a maximum of $2,500. The CRA issues a certificate of compliance (T2068) once payment or acceptable security is provided.

If no certificate has been issued, the buyer may become liable for the seller's tax under Income Tax Act, s. 116(5). The buyer can therefore hold back 25% of the proceeds (50% for certain property types), less any certificate limit.

What to do next

• Ask your realtor for the commission terms in writing, including how HST applies.
• Ask your lender for a written payout and discharge figure, including any prepayment penalty and discharge fee.
• Ask your lawyer for an estimate of legal fees and a draft statement of adjustments.
• Decide early whether you will claim the principal residence exemption, and keep records for your return.
• If you bought less than 365 days ago, or you are a non-resident, get advice before you list.
• Budget for moving, repairs, staging and cleaning.

Other taxes or charges may apply to your transaction, and how they apply depends on your situation, so it is worth confirming with a lawyer. A lawyer or accountant can confirm how these rules apply to your sale.

Frequently asked questions