What Are Closing Costs
Closing costs are the expenses you pay in addition to your down payment when you complete a home purchase.
In Toronto, the most common closing costs for resale properties include:
- Ontario land transfer tax
- Toronto municipal transfer tax
- Legal fees and disbursements
- Title insurance
- State of adjustments, such as prepaid property taxes or condo fees
For new construction properties, HST can also be a major factor, depending on the structure of the purchase and available rebates.
Land Transfer Tax in Toronto
Land transfer tax is typically the largest closing cost after your down payment.
In Toronto, buyers are subject to two land transfer taxes:
- A provincial land transfer tax
- A municipal land transfer tax
This means buyers purchasing within the City of Toronto pay both.
An important point for first-time buyers is that land transfer tax is not typically added to your mortgage. It is usually paid in cash at closing.
First-Time Buyer Rebates
Eligible first-time buyers may qualify for:
- Up to $4,000 back on the Ontario land transfer tax
- Up to $4,475 on the Toronto municipal land transfer tax
Combined, this can mean up to $8,475 in rebates.
Important Note on Eligibility
Not all programs define a first-time buyer the same way.
- Ontario requires that you have never owned a home anywhere in the world
- Toronto has its own eligibility criteria
- Federal GST or HST rebate programs for new homes have separate rules
The key takeaway is to confirm your eligibility early and not rely on assumptions. Speak with your mortgage broker, lawyer, or advisor before building your budget.
To simplify the process and understand each step in detail, visit our step-by-step guide to buying your first home in Toronto.
How Much Is Land Transfer Tax on a $1.2M Purchase
For a $1.2 million purchase in Toronto, land transfer tax can be significant, even after applying first-time buyer rebates.
The exact amount depends on:
- Current tax rate tables
- Your eligibility for rebates
- The final purchase price and closing date
Buyers should use the City of Toronto land transfer tax calculator or confirm the exact amount with their lawyer before finalizing their numbers
The most important takeaway is to plan for this cost early, not at the end of the transaction.
Legal Fees When Buying a Home in Toronto
Legal fees vary depending on the law firm, property type, and complexity of the transaction.
These costs often include:
- Legal fees for the lawyer
- Document preparation
- Title searches
- Registration costs
- Bank and closing administration
- Disbursements
- HST on legal services
One common mistake is comparing lawyers based only on their base fee without understanding the full cost after disbursements and tax.
As a general guideline, many Toronto buyers budget around $3,000 for legal fees and title insurance on a standard resale purchase. Actual costs will vary.
What Is Title Insurance and Why It Matters
Title insurance is standard for most purchases and is typically required by lenders.
It protects against certain issues that may not be discovered during the closing process, including:
- Title Defects
- Undisclosed liens
- Encroachments
- Other ownership-related risks
For most buyers, the key takeaway is simple. If you are financing your purchase, title insurance will almost always be required.
What Are Closing Adjustments
Adjustments are smaller amounts that are credited or charged between the buyer and seller at closing.
Common examples include:
- Prepaid property taxes
- Prepaid condo maintenance fees
- Certain utility-related costs
If a seller has already paid for a portion of these expenses and you take ownership partway through that period, your lawyer will adjust the amounts so each party pays their share.
While these costs are smaller than land transfer tax, they are still part of your total closing budget.
What About New Construction and HST
New construction purchases can have a different cost structure.
In addition to standard closing costs, HST plays an important role.
There are federal rebate programs available for qualifying first-time buyers:
- Full or partial GST or federal HST relief may apply on homes up to $1 million
- Partial rebates may apply between $1 million and $1.5 million
Ontario has also introduced provincial rebate measures for qualifying buyers.
Because these rules are detailed and can change, it is important to confirm the latest information with your lawyer and accountant before proceeding.
What Catches First-Time Buyers Off Guard
The most common surprises include:
LAND TRANSFER TAX MUST BE PAID AT CLOSING
Many buyers assume it can be added to the mortgage. In most cases, it cannot.
TORONTO HAS TWO LAND TRANSFER TAXES
Both provincial and municipal taxes apply within the city.
LEGAL QUOTES ARE NOT ALWAYS COMPARABLE
The lowest advertised fee is not always the lowest total cost.
FIRST-TIME BUYERS DEFINITIONS VARY
You may qualify for one program but not another.
Don’t be caught off guard and get prepared by reading more here.
A Practical Rule of Thumb
For a typical Toronto resale purchase, many buyers budget approximately 1.5 to 4 percent of the purchase price for closing costs.
This depends on:
- Purchase price
- Location
- Property type
- Eligibility for rebates
Before making an offer, it is important to replace rough estimates with confirmed numbers from your mortgage broker, real estate advisor, and lawyer.
Final Thoughts
Closing costs are one of the most important parts of the buying process to understand early.
The goal is not just to qualify for a home. It is to ensure you can comfortably close on it.
A buyer who understands land transfer tax, legal fees, title insurance, and adjustments will make more informed decisions, avoid last-minute stress, and move forward with confidence.
Stay Ahead of the Market
Looking for more insights, strategies, and real-world advice? Explore from the Fox Marin team:
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This article was written by Ralph Fox, Broker of Record and Managing Partner here at Fox Marin Associates. Ralph is a Torontonian native who recognized from an early age that the most successful people in life apply long-term thinking to their investments, relationships, and life goals. It’s this philosophy, along with his lifelong entrepreneurial drive and exceptional business instincts, that help to establish Ralph as a top agent in the real estate market in downtown Toronto.
