The Hidden Costs of Buying a Home in Ontario. What First-Time Buyers Really Need To Know.

getmortgaged
Nov 20
2 min read

You’ve saved your down payment, you’re excited, and you’re finally ready to start shopping. But there’s one piece most first-time buyers don’t expect. Closing costs. These costs aren’t optional. They’re the extra expenses you’ll need to cover when the purchase becomes official, and planning for them early saves you a lot of last-minute stress.

Let’s walk through what they are, what they cost, and how to prepare.

1. The Three Major Closing Costs

Land Transfer Tax (LTT)

Every home purchase in Ontario comes with a provincial land transfer tax. Buyers in Toronto pay a municipal version on top of that.

First-time buyer rebates:

Ontario offers up to $4,000 back
Toronto offers up to $4,475 You can save up to $8,475 if you qualify.

Legal Fees

A real estate lawyer handles the title transfer, mortgage documents, and adjustments. Expect anywhere from $2,000 to $2,500, depending on location and complexity.

Mortgage Default Insurance (If You Put Less Than 20 Percent Down)

When your down payment is under 20 percent, you’ll have CMHC, Sagen, or Canada Guaranty insurance. The premium gets added to your mortgage. You only pay the PST portion at closing.

2. Hidden Costs Most First-Time Buyers Don’t Expect

Interest Adjustment

If your mortgage starts mid-month, you’ll cover the interest from closing day to your first official payment.

Property Tax Adjustments

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

Title Insurance

Almost every lender requires this. It protects you against fraud or issues with the title.Budget $250–$500.

Home Inspection and Appraisal

These give you peace of mind.Budget roughly $400–$800 combined.

3. Extra Costs When Buying New Construction

Buying a new build comes with additional items to review:

HST/GST. Often included, but confirm with your builder. Ontario has currently waived PST for first time buyers.
New Home Rebate. Available on certain purchases under specific conditions.
Tarion Warranty Enrollment Fee. Usually $600–$1,200, depending on the builder.

4. The Simple Rule of Thumb

Plan for 1.5 to 2 percent of the purchase price in closing costs.

Example: On a $700,000 home, expect $10,000 to $14,000 in additional funds at closing, on top of your down payment.

5. How to Get Financially Ready

Create a separate Closing Fund account so the money doesn’t mix with your down payment.
Ask your mortgage broker for an early estimate so you can plan ahead.
Keep a buffer for moving expenses, furniture, or unexpected fixes.

Small preparation now prevents last-minute scrambling later.

Final Thoughts

Closing costs aren’t the exciting part of buying a home, but they’re a huge part of feeling confident on closing day. When you budget for them early, you get to celebrate your keys without worrying about surprise expenses.