Buying a home in Ontario is a dream for many, but the journey involves more than just a down payment and mortgage. Unexpected closing costs can significantly impact your budget and affordability. Understanding these extra expenses is key to a smooth and successful purchase.

1. Land Transfer Tax (LTT)

This is one of the most significant closing costs you’ll face. The provincial Land Transfer Tax is a mandatory tax on all property purchases in Ontario. If you’re buying in Toronto, you’ll also pay an additional municipal Land Transfer Tax. This tax is calculated on a tiered system based on the purchase price and is due in cash on closing. While first-time buyers may be eligible for a rebate, it’s a non-negotiable expense for most.

2. Legal Fees & Disbursements

Hiring a real estate lawyer is essential for a legal and secure transaction. Legal fees cover critical services like title searches, document preparation, and ensuring the transfer of ownership is legally sound. These fees, along with disbursements (out-of-pocket expenses paid by your lawyer), typically range from $1,500 to $2,500 and are paid at closing.

3. Mortgage Default Insurance

If your down payment is less than 20% of the home’s purchase price, lenders require you to purchase mortgage default insurance. This protects the lender in case you default on your payments. The premium, often 2.8% to 4% of your loan amount, is usually added to your mortgage, but you must pay the provincial sales tax (PST/HST) on this premium upfront in cash.

4. Home Inspection & Appraisal

A home inspection is a smart investment, typically costing $400 to $600. It can reveal hidden issues and potential future repair costs, giving you leverage for negotiation or the option to walk away from the deal. Your mortgage lender may also require a professional appraisal to confirm the property’s market value before approving the loan. Appraisal fees generally run from $300 to $500.

5. Closing Adjustments

On closing day, you may need to reimburse the seller for prepaid expenses that cover a period after the ownership transfer. This can include a prorated portion of annual property taxes, condo fees, or utilities. These adjustments can add several hundred to a couple thousand dollars to your final bill.

6. Moving & Setup Costs

Don’t forget to budget for the physical act of moving. Costs for professional movers, truck rentals, and new utility hookups (like hydro, gas, and internet) can add up quickly. Consider the costs of new furniture or appliances that your new home may require as well.

7. Prepayment of Insurance & Property Tax

Lenders require you to have home insurance in place by the closing date. You’ll need to pay the first year’s premium upfront, which can be around $1,000 to $1,500. Additionally, some lenders may require a portion of your annual property taxes to be paid at closing and held in an escrow account.

8. Ongoing Homeownership Costs

Beyond the one-time costs, true affordability means planning for the ongoing expenses of homeownership. Set aside funds for regular maintenance and unexpected repairs. A common rule of thumb is to budget 1% to 3% of your home’s value annually for these costs.

Smart Solution

We get it, Hidden costs can feel overwhelming. At Cannect, our mortgage advisors take the guesswork out. We’ll break down your true affordability, show you what to expect at every step, and help you plan ahead so there are no surprises on closing day.

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