Many first-time home buyers focus on saving for the down payment. But when it comes time to actually close on a property, they often discover there are several additional costs that were not fully accounted for.
In Ontario, closing costs can easily add up to 1.5% to 4% of the purchase price, depending on the type of property and location. Understanding these expenses ahead of time can help buyers plan properly and avoid financial surprises.
In the video below, I break down the real closing costs that many first-time buyers overlook when purchasing a home in Toronto, Vaughan, Richmond Hill, and across the Greater Toronto Area.
Watch the full video here:
1. Land Transfer Tax
One of the largest closing costs in Ontario is the Land Transfer Tax.
Buyers must pay a provincial land transfer tax when purchasing property anywhere in Ontario. If the property is located in Toronto, there is also a municipal land transfer tax, which effectively doubles the amount.
Fortunately, first-time buyers may qualify for rebates:
- Ontario rebate: up to $4,000
- Toronto rebate: up to $4,475
However, depending on the purchase price, buyers may still need to pay several thousand dollars even after these rebates.
For example, on an $800,000 property in Toronto, there can still be a noticeable amount due on closing day.
2. Legal Fees and Disbursements
Every real estate transaction requires a lawyer to complete the closing process. Your lawyer handles the legal transfer of ownership, registers the mortgage, and ensures that the title is clear.
Typical legal costs in Ontario range between:
$1,500 – $2,500
In addition to the legal fee itself, there are also disbursements, which may include administrative costs, title searches, and registration fees.
Many buyers assume the quoted legal fee is the final cost, but the total is often slightly higher once disbursements are included.
3. Title Insurance
Title insurance protects both the buyer and the lender against potential issues with the property’s ownership, such as title fraud or boundary disputes.
Most lenders require this insurance as part of the mortgage process.
Typical cost:
$300 – $600 (one-time fee)
While it’s not a large expense compared to others, many first-time buyers don’t realize it exists until they receive the final closing statement from their lawyer.
4. Home Inspection
If you are purchasing a resale property, a home inspection is strongly recommended.
A qualified inspector evaluates the condition of the property and identifies potential issues before the purchase is finalized.
Typical cost:
$400 – $700
Although this is usually paid earlier in the buying process, it is still part of the total cost of acquiring the property.
5. Mortgage Default Insurance Tax
If your down payment is less than 20%, your mortgage will require default insurance (often referred to as CMHC insurance).
The insurance premium itself is typically added to the mortgage balance. However, many buyers are surprised to learn that the sales tax on that insurance must be paid upfront at closing.
Depending on the purchase price, this tax can amount to several thousand dollars.
6. Adjustments
Adjustments are reimbursements made to the seller for expenses they have already paid in advance.
Common adjustments include:
- Property taxes
- Condo maintenance fees
- Heating fuel (oil or propane in some homes)
For example, if the seller has already paid property taxes for the year and the closing occurs midway through that period, the buyer reimburses the seller for the remaining months.
The exact amount depends on timing but can range from a few hundred to several thousand dollars.
7. Pre-Construction Development Charges
Buyers purchasing pre-construction homes or condos should pay special attention to potential development-related charges.
These may include:
- Development charges
- Education levies
- Utility connection fees
- Tarion warranty fees
Some builders include caps on these costs, while others do not. Without a cap, these fees can sometimes reach $10,000 to $30,000 or more at final closing.
This is one of the most important details to review before signing a pre-construction agreement.
8. Moving and Setup Costs
Although they are not technically closing costs, buyers should also prepare for additional expenses that occur immediately after taking possession of the home.
These may include:
- Moving services
- Utility setup
- New locks
- Minor repairs
- Furniture or appliances
These early expenses can quickly add up, especially for first-time homeowners.
How Much Should First-Time Buyers Budget?
As a general guideline:
- Resale homes in Ontario: budget approximately 1.5% – 2.5% of the purchase price for closing costs.
- Toronto properties: expect slightly higher costs due to the additional municipal land transfer tax.
- Pre-construction purchases: closing costs can sometimes reach 3% – 4%, depending on builder terms.
Every transaction is unique, so it’s always wise to estimate these costs early when planning your purchase.
Final Thoughts
Buying your first home is a major milestone, but it’s important to understand the full financial picture before moving forward.
The goal isn’t simply to qualify for a mortgage or save for a down payment — it’s to ensure you are fully prepared for the entire closing process.
If you’re considering buying your first home in Toronto, Vaughan, Richmond Hill, or anywhere in the GTA, understanding these costs early can make the experience significantly smoother.
For a full breakdown, watch the video above or reach out if you’d like help estimating the closing costs based on your specific situation.
Soheil Shivarani
Real Estate Advisor
Toronto | Vaughan | Richmond Hill | GTA
