The Hidden Costs of Buying a Home in Ontario — What First-Time Buyers Need to Budget For

So you’ve saved your down payment — but what about closing costs?

This is one of the biggest surprises for first-time homebuyers in Ontario. Closing costs aren’t optional — they’re the extra expenses you’ll need to cover when your home purchase becomes official.

Let’s break down what they are, what they cost, and how to plan for them.

1. The Big Three Closing Costs

Land Transfer Tax (LTT)

Every Ontario home purchase triggers a provincial land transfer tax — and if you’re buying in Toronto, there’s also a municipal version.

💡 First-time buyer rebate:Ontario offers up to $4,000 back, and Toronto offers up to $4,475 — that’s $8,475 total savings for eligible buyers.

Legal Fees

You’ll need a real estate lawyer to handle title registration, adjustments, and mortgage documentation.✅ Average range: $1,000–$2,500, depending on the complexity and location.

Mortgage Default Insurance

If your down payment is under 20%, you’ll need CMHC, Sagen, or Canada Guaranty insurance.You only pay the sales tax portion (PST) at closing; the premium is added to your mortgage.

2. Hidden Costs Most Buyers Forget

Interest Adjustment

If your mortgage funds mid-month, you’ll pay interest from your closing date to your first payment date.

Property Tax Adjustments

If the seller prepaid property taxes, you’ll reimburse them for the unused portion.

Title Insurance

Protects you from fraud or title errors — most lenders require it. Cost: $250–$500.

Home Inspection & Appraisal

Budget $400–$800 total. It’s peace of mind worth paying for.

3. Extra Costs for New Construction Buyers

Buying a brand-new home? You might also face:

• HST or GST: Often included in the price, but verify with your builder.

• New Home Rebate: Available for homes under $450,000 (conditions apply).

• Tarion Warranty Enrollment Fee: Varies by builder but typically $600–$1,200.

4. The Rule of Thumb

Expect your closing costs to equal 1.5–2% of your purchase price.

Example:On a $700,000 home, that’s about $10,000–$14,000 in additional funds needed at closing — on top of your down payment.

5. How to Prepare Financially

✅ Set up a “Closing Fund” account separate from your down payment savings.✅ Ask your mortgage broker for a cost estimate early in the process.✅ Don’t drain your savings — leave a buffer for moving costs, furniture, or small repairs.

Final Thoughts

Closing costs might not be glamorous, but they’re crucial to avoid surprises.When you plan ahead, your closing day becomes a celebration — not a scramble.

CTA: Want a full cost estimate for your first home?Let’s review your numbers together. Book your complimentary call at LaframboiseMortgage.ca.