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A home is a significant purchase, and odds are, you’ll need a mortgage to support such a cost. But the mortgage payments themselves, while hefty, aren’t the only financial aspects of buying a home that you need to budget for. You’ll want to consider the mortgage closing costs as well. These are administrative and legal expenses related to purchasing a property. Knowledge of closing costs will help you figure out what exactly you are expected to pay when buying a home in the GTA, there are several closing costs.

In this article, we’ll discuss what these closing costs that you’ll be obligated to cover by the time you get the keys.

Looking to purchase a house, here is your mortgage documents checklist.

Closing Costs in the GTA and Beyond

Generally speaking, you can expect to pay anywhere from 2% to 5% on closing costs when you buy a home. Here is a rundown of the closing costs that may be on your list:

Appraisal – Before lenders agree to extend a loan, they’ll want to verify the value of the property being purchased. Ideally, the appraised value will match the purchase price. If the buyer is requesting more money for a mortgage than what the home is actually worth, the lender probably won’t agree to the loan unless the buyer is able to bridge the gap themselves. Buyers are responsible for paying for appraisals, which run in the price range of $400 to $500.

Home inspection – It’s highly recommended that buyers have a home inspection conducted on the home they agree to purchase. Including a home inspection clause in their contract will give buyers a chance to have the home scoped out by a professional to uncover any major, minor and latent problems that may not have been noticed during the initial walk-through. Home inspections can cost anywhere between $400 to $700, depending on the size and condition of the home.

Another cost you might need to consider is the mortgage prepayment penalty.

Lawyer fees – In the GTA, it’s customary for real estate lawyers to be involved in real estate deals. There is quite a bit of paperwork that will need to be signed in the lawyer’s office, which your attorney will look over to make sure you’re entering into a sound agreement. And the lawyer is the one who usually hands over the keys when the deal is done. The fee charged varies quite a bit from one deal to the next, but you will probably pay between $2,000 to $3,000 on average in legal fees.

Title search fees – If these fees aren’t already included in the legal fees, you’ll pay an additional $250 to $400 for a title search to be conducted and title insurance to protect you in case something is found on the title that could impact the transaction. A title search is important because it will make sure that the title is free and clear of any issues, such as liens. It will also ensure that the person selling you the home has the legal right to do so.

Land transfer taxes – Whenever a property is transferred from one party to another, land transfer taxes are applied. For those buying real estate in the GTA, there are two separate land transfer taxes to be paid: municipal and provincial. The amount is determined based on a percentage of the price of the property. The rate is different in every province and is applied based on the price of your property. They tend to be between 0.5% and 2%. For example, a $500,000 home, you’ll have to pay a total of $12,950 ($6,475 for each type of land transfer tax).

Adjustments – Any property taxes, utilities, or condo fees that the seller has already paid for after the closing date will have to be reimbursed to the seller.

Fire insurance: In Canada, it is essential to take out fire insurance at the point of taking possession of your property. The mortgage lender will require this in order for you to receive the money. Most insurance companies will want you to have your home inspected before insuring the property. Go through these proceedings early so you don’t encounter any problems when you want to move into your new home.

Mortgage default insurance – If you put less than 20% down towards your purchase, you’ll have to pay mortgage default insurance, which is based on the amount of your down payment:

  • 5% to 9.99% = 4%
  • 10% to 14.99% = 3.1%
  • 15% to 19.99% = 2.8%

Check out how you can avoid paying mortgage default insurance (CMHC insurance).

Other related fees: On top of those fees, as a homeowner, you will also have to pay the yearly property and school taxes, electric and utility bills, home and fire insurance and any debt that you may have (such as car or furniture loans). On top of that, you should also consider maintenance costs. Your roof will eventually have to be replaced, things might break down, you might want to repaint, etc. All of these things constitute homeownership fees.

Why do different mortgage lenders offer different mortgage rates? Learn here.

Cost of Buying a House in Canada

How Does Realtor Commission Work In Ontario?

In Ontario, it’s customary for the seller to cover the cost of real estate agent commissions. When a seller lists their home for sale, the listing agent they hire to market the property will charge them a certain commission rate, which is usually around 5% on average. This fee is then split between the listing and buyer agent.

The way that the commission is split will depend on what is negotiated. Listing agents will usually advertise their specific commission split to buyer agents. The commissions can be split 50/50, though they can be divided in any way that is fitting for both the buyer and seller agent.

Assuming a 5% commission and a sale price of $500,000, $25,000 (plus tax) will need to be paid in commissions by the seller. This fee is then split accordingly between the buyer and listing agents.

Considering the fact that sellers pay realtor commissions, buyers are typically off the hook for this fee. That said, there are rare circumstances where sellers do not pay these commissions, leaving the buyer to have to pick up the slack. When you sign a Buyer Representation Agreement, there will be a section that discusses commissions and what would happen in the event that the seller doesn’t pay the buyer’s agent commission.

If that happens, the buyer will have to pay the commission. Having said that, most agents will negotiate with the seller to be paid a commission. Forcing buyers to pay would only be a last resort and would be a rare case.

Here’s how you can negotiate the best mortgage contract this year.

Finding The Right Mortgage Lender in Ontario

When it’s time for you to apply for a mortgage, you might automatically head to your bank to do so. But while this is a viable option, you have other options to consider.

It might be wise for you to work with an independent mortgage specialist who will shop around for a mortgage for you with a number of different lenders that they have in their network. They’ll be able to compare all the mortgage terms, interest rates, and fees to help you make a better decision on which lender to work with.

The difference between working with a bank versus a mortgage broker is that a broker works for you, while the bank works for themselves. Banks are out to make a profit and are only able to offer the limited products that they have. Instead, a broker works on your behalf to find the best and most affordable mortgage.

Looking For a Mortgage in The GTA?

If you’re buying a home soon, you’ll want to get a head start with the mortgage application process. Just be sure that your financial situation is healthy enough to not only afford your mortgage payments but also all the closing costs that come with buying a home in the GTA. Loans Canada can help connect you with a third-party mortgage lender who will offer you a mortgage at ideal terms and the lowest rate.

Note: Loans Canada does not arrange, underwrite or broker mortgages. We are a simple referral service.


Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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