Most buyers have their down payment worked out to the dollar. The cheque that surprises them is the one that comes after: closing costs.
The short answer: plan for about 2% of the purchase price on top of your down payment. Most of that is Ontario land transfer tax. On a $1.3 million home in Vaughan, the land transfer tax alone is about $22,500.
Here's what goes into that 2%, how the tax is worked out, and what changes if you're a first-time buyer or buying in Toronto.
What the 2% covers
Closing costs are everything you pay to close the deal that isn't the price of the home itself. For a resale home in Vaughan, that usually means:
- Ontario land transfer tax. The biggest piece by far.
- Legal fees. Your real estate lawyer handles the title transfer, the mortgage and the closing funds.
- Title insurance. Usually arranged through your lawyer.
- A home inspection. In the GTA it usually costs $400 to $700 and takes two to three hours.
- Adjustments. If the seller has already prepaid property tax for part of the year you'll own the home, you pay them back for those days on closing.
On a $1.3 million home, 2% is about $26,000, on top of your down payment.
How Ontario land transfer tax is worked out
Land transfer tax is charged in brackets, a bit like income tax. Each slice of the price is taxed at its own rate:
- 0.5% on the first $55,000
- 1% on the portion from $55,000 to $250,000
- 1.5% on the portion from $250,000 to $400,000
- 2% on the portion from $400,000 to $2 million
The first $400,000 of any price always works out to $4,475 in tax. After that, every dollar up to $2 million is taxed at 2%.
What it looks like at Vaughan prices
Using those brackets:
- $1,000,000 home: $4,475 plus 2% of $600,000 ($12,000) = about $16,475.
- $1,300,000 home: $4,475 plus 2% of $900,000 ($18,000) = about $22,500.
- $1,500,000 home: $4,475 plus 2% of $1,100,000 ($22,000) = about $26,475.
That's why land transfer tax is most of your closing costs. Legal fees, title insurance, the inspection and adjustments make up the rest.
Buying in Toronto? It roughly doubles
If the home is inside the City of Toronto, you also pay a municipal land transfer tax of about the same amount as the provincial one. So a buyer moving from Vaughan into Toronto at the same price can expect roughly double the land transfer tax.
If you're comparing a home in Woodbridge or Maple with one just south of Steeles, put this in the math. It can change which home is really the better deal.
First-time buyers get money back
If you've never owned a home, you may qualify for a refund:
- Ontario refunds up to $4,000 of the provincial land transfer tax.
- The City of Toronto refunds up to $4,475 of its municipal tax.
- So a first-time buyer in Toronto can save up to $8,475.
To qualify, you must never have owned a home anywhere in the world, and you must move in within nine months. Your lawyer claims the refund for you at closing, so tell them early that you're a first-time buyer.
On a $1,000,000 home in Vaughan, the $4,000 refund takes the provincial tax from about $16,475 down to about $12,475.
Other money to have ready
Closing costs aren't the only cash you need besides the down payment:
- Your deposit. In the GTA, about 5% of the price, usually due within 24 hours of your offer being accepted. It's held in trust by the listing brokerage and counts toward your down payment, but it has to be ready to move right away.
- PST on mortgage insurance. If you put down less than 20%, in Ontario the provincial sales tax on the insurance premium can't be added to your mortgage. You pay it in cash when you get your mortgage.
- Pre-construction buyers may pay extra development charges at closing. Read our pre-construction page before you sign with a builder.
What this means for you
- Budget 2% on top of your down payment as a starting point.
- Work out your land transfer tax at the price you actually plan to pay, using the brackets above.
- Add Toronto's tax if you're looking inside the city.
- Tell your lawyer you're a first-time buyer so they claim the refund at closing.
- Keep the cash liquid. Your deposit is due within a day, and closing costs are due on closing day.
For the full process, see our buyer guide. For the down payment side, read how much you need for a down payment in Ontario, and for more quick answers see our buyer questions. Selling to buy? Our cost to sell calculator shows what you'll walk away with.
Ready to plan your purchase?
We'll help you work out your full number before you start looking, so there are no surprises on closing day. Call or text 647-694-3109 or get a free home evaluation below.
Michael Barillari, Broker, RE/MAX Premier The OP Team, Brokerage.
General information only; talk to your lender/lawyer/accountant about your situation.