Seller Closing Costs in Ontario: What to Budget For

Most sellers focus on what they will net from a sale — but the gap between the accepted offer price and the money that actually lands in your bank account can be significant. Seller closing costs in Ontario typically range from 3% to 5% of the sale price when real estate commission is included, and overlooking even one line item can leave you scrambling on closing day.

This article walks through every cost category sellers commonly encounter in an Ontario real estate transaction, explains what drives each one, and flags the items most likely to catch you off guard.

Real Estate Commission

For most sellers, commission is the single largest closing cost. Traditionally structured as a percentage of the sale price, commission is split between the listing brokerage and the buyer's brokerage and is paid by the seller at closing.

A few things to understand:

• Commission rates are negotiable. There is no fixed rate mandated by law in Ontario.
• HST applies to commission. Because real estate commission is a professional service, 13% HST is charged on top of the commission amount. This is sometimes omitted from quick mental math.
• Discount models, flat-fee listings, and private-sale options exist, each with different trade-offs in terms of service level and buyer-agent cooperation.

The commission, HST included, is typically paid directly from the sale proceeds at closing — your lawyer deducts it and remits it to the brokerages before the net proceeds are released to you.

Legal Fees and Disbursements

Ontario sellers require a real estate lawyer to:

• Review the Agreement of Purchase and Sale
• Respond to the buyer's requisitions (title questions)
• Discharge any existing mortgages and liens from title
• Prepare the transfer document and closing deliverables
• Receive and distribute the closing funds

Legal fees are the lawyer's professional charge for this work. Disbursements are the hard costs the lawyer pays on your behalf — title searches, registration fees, courier charges, and similar expenses.

At Treadstone Law, we charge flat fees for seller transactions so you know the number before you sign anything. As of writing, disbursement amounts vary depending on the number of mortgages to discharge and the municipality, so ask for a full quote that includes both fees and estimated disbursements.

HST applies to legal fees (the professional service component) as well.

Mortgage Discharge Fee and Prepayment Penalty

If you have an existing mortgage on the property, it must be discharged at closing. This involves two potential costs:

Mortgage Discharge Fee

Your lender typically charges an administrative fee to prepare and register the discharge of mortgage. As of writing, this fee varies by lender — confirm the amount with your bank or mortgage company well before closing.

Prepayment Penalty

If you are breaking a closed mortgage before the end of its term, your lender will almost certainly charge a prepayment penalty. This is often the most significant surprise cost for sellers who did not think through the timing of their sale relative to their mortgage renewal date.

Prepayment penalties are calculated differently by different lenders — some use an interest rate differential (IRD) formula, others use a flat three-months-interest calculation. The IRD calculation can produce very large numbers when interest rates have risen since your mortgage was originated. Contact your lender for a payout statement as soon as you list, not the week before closing.

Variable-rate mortgages typically carry a smaller penalty (often three months' interest) than fixed-rate mortgages, but confirm with your lender.

Real Property Report (Survey)

Buyers sometimes request a current survey (real property report) as a condition of the transaction, or a title insurer may require one. If your existing survey is outdated — for example, if you built an addition, put up a fence, or added a pool since the last survey — a new one may be needed.

Survey costs in Ontario vary with property size and complexity. Sellers are not always required to provide a survey (title insurance frequently substitutes for one in residential transactions), but if it is a term of your agreement, budget accordingly.

FINTRAC Compliance Documentation

Under Canada's federal anti-money-laundering legislation, real estate lawyers and agents are required to verify the identity of all parties and complete FINTRAC documentation for every transaction. This is not optional and is not a legal fee — it is a regulatory obligation.

The practical implication for sellers: expect to provide government-issued photo identification, answer questions about the nature of the transaction, and complete a client information form. If you are selling as a corporation or on behalf of an estate, additional documentation will be required.

Statement of Adjustments

The statement of adjustments settles the financial split between buyer and seller for any prepaid or accrued items as of the closing date. Common adjustments include:

• Property taxes: If you have prepaid property taxes beyond the closing date, you receive a credit. If you owe taxes up to closing that have not yet been billed, the buyer receives a credit.
• Utilities and condo fees: If a utility deposit or prepaid condo maintenance fee is transferring with the property, these are adjusted between the parties.
• Prepaid rent: If you are selling a tenanted property, any prepaid rent and last month's rent deposit are transferred to the buyer as an adjustment.

Adjustments are not always large, but they can swing several thousand dollars in either direction depending on timing and whether there are tenants or recent tax prepayments involved.

Capital Gains Tax (For Non-Principal Residences)

The principal residence exemption shelters most homeowners from tax on their sale profit. If the property you are selling was your principal residence for every year you owned it, no capital gains tax applies.

However, if you are selling:

• A rental property
• A cottage or vacation property
• A property that was your principal residence for only some of the years you owned it
• A property held in a corporation

...capital gains tax may apply to the profit. As of writing, the inclusion rate for capital gains and the applicable tax rates are set by the federal government and your province — verify current rates with an accountant before you close.

Capital gains are not paid through the real estate lawyer at closing. They are reported on your income tax return for the year of the sale. But you need to plan for them in advance, because the obligation arises on the closing date, not on April 30 of the following year.

Moving Costs

Often overlooked in closing cost calculations: the cost of actually leaving. Moving costs in Ontario vary enormously depending on distance, volume, season, and whether you use a professional mover or a rented truck. Booking movers early — especially for spring and summer moves — is both cheaper and more reliable than calling a week before possession.

Frequently asked questions