The Hidden Costs of New Construction: What Ontario Buyers Need to Know About Closing Adjustments

If you are buying a new home or condo from a builder, you have probably heard about something called closing adjustments. These are extra costs that can be added to your final bill on top of the agreed purchase price. They often come as a surprise and can easily add thousands of dollars to what you need to bring to closing.

Here is what you should know before you get the keys.

Why Adjustments Matter

When lenders decide how much they are willing to lend you for your purchase, they do not include these adjustment costs. That means the extra money has to come directly out of your pocket. In today’s market, where many buyers are already stretching to qualify, these unplanned costs can cause serious stress just days before closing.

During the busy pandemic years, many buyers purchased from builders who were not willing to cap or limit these adjustments in the Agreement of Purchase and Sale (APS). As those homes now reach completion, buyers are discovering much higher final bills than expected.

Let’s look at the most common types of adjustments and what they could mean for you.

1. HST and Rebate Adjustments

New homes in Ontario are subject to HST, which is usually built into the purchase price. However, the government offers a rebate of up to $24,000, which most buyers assign to the builder on closing. To qualify for that rebate, you must move into the property as your primary residence (or an immediate family member must).

If you purchased the property as an investment or rental, you do not qualify for the rebate, and the builder will charge you the full $24,000 at closing. You can apply to recover that amount later through the HST New Residential Rental Rebate program once the unit is rented for at least one year, but you still have to pay it upfront.

In tight markets, this surprise alone can create a real cash crunch.

2. Development Charges, Levies, and Connection Fees

Most builders pass through municipal costs such as development charges, education levies, parkland fees, and utility or meter connection fees directly to the buyer. These can vary widely between municipalities and depend on local bylaws in effect at the time of closing.

Since many cities have increased these fees over the past few years, they can now total several thousand dollars. Unless your purchase agreement specifically limits them, you will likely see them appear in your final statement of adjustments.

3. Tarion and Builder Administration Fees

Your new home is enrolled with Tarion for warranty protection, and that enrolment fee is charged by the builder. The amount is based on your purchase price and can increase if Tarion updates its fee schedule between when you signed your agreement and when you close.

Builders may also include additional administrative or site-related costs such as:

• Warranty administration fees

• Meter or security deposits

• Driveway paving or grading fees

• Landscaping, fencing, or boulevard tree planting

Some of these are one-time charges. Others are estimated at closing and adjusted later once final costs are known.

Practical Tips for Buyers

Here are some ways to protect yourself and plan ahead:

• Have your lawyer review your Agreement of Purchase and Sale early to identify where adjustments could apply. If you have not signed yet, try to negotiate a cap or limit on these costs.

• Ask for an itemized estimate from the builder well before closing. Request details on Tarion fees, development charges, meter deposits, and your HST rebate status. Do not wait for the final statement of adjustments, which often arrives only a week before closing.

• Be clear about your HST eligibility.  If you or a family member are not living in the home, expect to pay back the rebate at closing and budget for that amount.

Bottom line: Closing adjustments can easily add up to thousands of dollars on top of your purchase price. The best way to avoid surprises is to understand them early and budget accordingly.

If you have a new construction home or condo closing soon, let’s go over your mortgage numbers together so you know exactly what to expect and how to plan for it.