Simplifying Hidden Costs in a Real Estate Transaction

You have purchased a property and secured a mortgage to cover the balance due on closing. Is that enough to close your transaction?

Many clients assume that once they have the deposit and the remainder of the purchase price, they are prepared to close. However, clients are often surprised—and dismayed— to discover they need significantly more money to close. The reason is simple. Mortgage funds can only be used to pay the balance due on closing. The following are the most common additional closing costs that buyers should anticipate.

Land Transfer Tax

One of the most significant closing costs is the land transfer tax, a mandatory payment to the province based on the purchase price of the property. If the property is located in the City of Toronto, an equivalent municipal land transfer tax must also be paid. How much can this be expected to cost?

Ontario Land Transfer Tax Rates:[1]

·       0.5% on the first $55,000.00

·       1.0% on the portion over $55,000.00 up to $250,000.00

·       1.5% on the portion over $250,000.00 up to $400,000.00

·       2.0% on the portion over $400,000.00

·       2.5% on the portion exceeding $2,000,000.00

Example:

For a condominium in Toronto purchased at the Q2 2025 average price of $685,961.00,[2] the provincial land transfer tax would be:

·       0.5% on the first $55,000.00 = $275.00

·       1.0% on $195,000.00 = $1,950.00

·       1.5% on $150,000.00 = $2,250.00

·       2.0% on $285,961.00 = $5,719.22

Total provincial land transfer tax = $10,194.22

As the property is located in Toronto, an additional $10,194.22 municipal land transfer tax would also apply.

Note: First-time homebuyers may qualify for a rebate. You can estimate your land transfer tax using this calculator: Ontario Land Transfer Tax Calculator.

Title Insurance

Additionally, most lenders require purchasers to obtain title insurance before advancing mortgage funds. Title insurance is not the same as property insurance. Title insurance protects both homeowners and lenders from losses related to the property’s legal title. Lenders often require it before advancing funds to protect the lender from defects in the property’s title that may not be discovered through a regular title search. Title insurance is a one-time payment that can range anywhere from $150.00 to $1,000.00, depending on the property’s purchase price and location.

Property Insurance

Lenders normally also require property insurance as a condition of the mortgage. Unlike title insurance, property insurance protects the physical property itself and must be maintained for the entire term of the mortgage. In Ontario, annual premiums typically range from $1,000.00 to $2,500.00.

Adjustments on Closing

Before closing, your lawyer will prepare a Statement of Adjustments to apportion certain costs between the seller and the purchaser. These costs typically include property taxes and condominium fees. These amounts are calculated annually and prorated based on the closing date. You may be required to reimburse the seller for amounts already paid in advance. These costs will normally vary and depend on the carrying cost of the property.

Legal Fees and Registration Fees

Finally, buyers should budget for their lawyer’s services and registration costs. Registration fees include the cost of registering the deed and mortgage with the land registry office. Legal fees typically cover the lawyer’s work in reviewing title, preparing the necessary closing documents, and completing the closing. These fees can vary depending on the complexity of the transaction.

Purchasing a property is often a big step in people’s lives. By planning for closing costs, homebuyers can reduce stress and ensure a smooth and successful transaction. At Arhire Law, clients are guided through each step of the real estate process. Our goal is to ensure you are never caught off guard on closing day.

[1] “Calculating Land Transfer Tax” (last modified 08 July 2025), online: Government of Ontario < https://www.ontario.ca/document/land-transfer-tax/calculating-land-transfer-tax>.

[2] “Condo Market Report” (31 July 2025), online: Toronto Regional Real Estate Board < https://trreb.ca/market-data/condo-market-report/>.

Last Updated: September 4, 2025

Disclaimer: This article is intended for general information purposes only. It is not intended as legal advice. It does not create a lawyer-client relationship and may not address your specific circumstances. You should consult with a qualified lawyer.