The closing date when buying a home is a time for celebration for most homebuyers – keys are transferred from the seller to the buyer and many hurdles have already been overcome to achieve this big step. However, before breaking out the champagne there are a few expenses that need to be paid for first.
These closing costs must be paid upfront in cash and include the down payment, PST on your mortgage loan insurance premium, land transfer tax, legal fees, title insurance and other miscellaneous costs.
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To help first-time homebuyers better understand what costs they should expect to pay on closing day, we compiled estimates based on average home prices in 24 major markets across Ontario. Calculations assume the minimum down payment is made (and includes the initial deposit amount), that all land transfer tax (LTT) rebates for first-time home buyers have been applied, and that mortgage default insurance costs have been rolled into the mortgage, and hence do not need to be paid on closing day.
How Much Will Buyers Pay on Closing Day Across Ontario?
Home buyers in Oakville can expect to pay the largest amount on closing day, though this is not surprising as Oakville has one of the highest average home prices in all of Ontario at $1,571,254 – more than twice the national average of $686,371. That requires a down payment of $314,251 and a final closing bill of $340,151.
The next three spots on our list come from York Region, with Richmond Hill being the second-most expensive market, Vaughan the third, and Markham the fourth. These York Region cities all have minimum down payments above $260,000 and closing bills above $280,000.
Buyers looking for affordability will have to head out of the Greater Toronto Area and into smaller cities like Guelph, Barrie, St. Catharines and Kingston, which all have average home prices below the Ontario average of $884,700. Though even among these cities there exists quite a big gap in expenses. Guelph’s average home price of $808,200 will require a closing day bill of $68,867, while Kingston’s average home price of $525,100 only requires a closing day bill of $34,079.
For maximum affordability, look to Northern Ontario where home prices are significantly lower. Sudbury is the second most affordable market on our list, with an average home price of $423,400 and a final closing bill of $25,400. Sault Ste. Marie has the smallest closing day costs for first-time home buyers with an average home price of $274,100 and a final closing bill of $16,538 – more than $60,000 cheaper than the provincial final closing bill.
Check out the infographic below to see how estimated closing costs range across Ontario for first-time home buyers if they were purchasing the average-priced home in each city.
Methodology
Average home prices for March 2023 were sourced from each city’s regional real estate board or the Canadian Real Estate Association.
The minimum down payment is due on closing day and is calculated as follows:
- Purchase price of $500,000 or less: 5% of the purchase price
- Purchase price of $500,000 to $999,999: 5% of the first $500,000 of the purchase price, 10% for the portion of the purchase price above $500,000
- Purchase price of $1 million or more: 20% of the purchase price
The mortgage loan insurance premium can be paid on closing day, or added to the home’s mortgage amount. The mortgage insurance premium for a loan based on a 5% down payment (i.e. loan-to-value ratio of 95%) is 4% of the total loan, i.e. 4% x (home value – down payment).
The PST on the mortgage insurance premium in Ontario is 8% and is due on closing day.
Ontario land transfer tax (LTT), excluding the rebate for first-time home buyers of up to $4,000, is calculated as:
- Amounts up to and including $55,000: 0.5%
- Amounts from $55,000.01 to $250,000: 1.0%
- Amounts from $250,000.01 to $400,000: 1.5%
- Amounts from $400,000.01 to $2,000,000: 2.0%
- Amounts over $2,000,000: 2.5%
Eligible first-time buyers in Ontario can receive a LTT rebate of up to $4,000.
Home buyers in the City of Toronto are also subject to a Municipal Land Transfer Tax (MLTT). Rates follow the same structure as the Ontario LTT. Eligible first-time buyers in the City of Toronto can receive a LTT rebate of up to $4,000.
