There are various closing costs associated with purchasing a home in Toronto. Below is a brief summary of the most common expenses, their approximate cost, and how they are paid.
Land Transfer Tax. Generally, the most significant cost when purchasing a home in Ontario is land transfer tax. There are two types of land transfer tax that may be applicable to purchases in Ontario – Provincial Land Transfer Tax and Municipal Land Transfer Tax. Currently the municipality of Toronto is the only municipality that charges Municipal Land Transfer Tax on sales of single family residences within its boundaries. The province of Ontario and the city of Toronto use the exact same method to calculate land transfer tax on single family residences. The detailed method of calculation can be found below. As an example, the land transfer tax on a single family residence with a purchase price of $500,000.00 is $6,475.00, if in Ontario, but outside of Toronto and $12,950.00 (double the tax) if the property is inside Toronto. The province of Ontario offers an instant rebate of up to $4,000.00 to first-time homebuyers and the city of Toronto offers an instant rebate of up to $4,475.00 (total potential savings of $8,475.00). Your lawyer should complete the rebate processes on your behalf in order for you to receive the rebate if you are a first-time homebuyer. It is important to hire a lawyer that understands the rebate process. It could save you $8,475.00.
Title Insurance. Title insurance is a one-time fee paid by you upon your purchase that generally protects against:
- unknown title defects (title issues that prevent you from having clear ownership of the property);
- title fraud and forgery;
- encroachment issues (i.e. a structure on your property needs to be removed because it is actually on your neighbour’s property);
- errors in surveys and public records; and
- other title related issues that can affect your ability to sell, mortgage, or lease your property in the future.
Title insurance is not a requirement in Ontario. The decision on whether to purchase title insurance should be discussed with your lawyer, and you should review the booklet “Working with a Lawyer when Buying a Home” published by TitlePLUS. It is important to remember that title insurance does not replace legal advice when purchasing a property.
Registration Fees. For all transactions in Ontario, there is a statutory imposed fee to register a Transfer (or Deed) of $75.27 and another registration fee of $75.27 to register a mortgage with your local land registry office.
Legal Fees. This is the fee paid to your lawyer for advising upon the transaction and completing it on your behalf.
Disbursements. These are fees paid by your lawyer on your behalf. Examples include the following:
- title searching fees (to investigate whether the person who executed the Agreement of Purchase and Sale actually owns the property and to ensure that they have the ability to pass on free and clear title, subject to reasonable encumbrances);
- fees paid to municipalities for tax and utility certificates (to ensure that the vendor has paid their property taxes and municipal utility bills to date, as these back taxes and unpaid utilities attach to the property);
- courier fees (to send your closing documents to the vendor’s lawyer and a closing package to you);
- banking fees (for certified cheques, bank drafts and wire payments that are required to ensure the vendor receives the closing funds); and
- general office administration fees (long distance phone calls, printing, copying and faxes).
Generally, disbursements on a real estate transaction should be $300.00 to $400.00.
HST. Unfortunately, HST is applicable to legal fees and disbursements in Ontario. The good news is that you do not have to pay HST on land transfer tax, your title insurance policy premium or the statutorily imposed registration fees.
Should you have any questions regarding this article, or real estate law generally, feel free to reach out to us at Lemke Law at 647-361-3085.
Click here for a breakdown of how to calculate the provincial Land Transfer Tax: http://www.fin.gov.on.ca/en/bulletins/ltt/2_2005.html
Click here for a breakdown of how to calculate the municipal Land Transfer Tax: https://www1.toronto.ca/wps/portal/contentonly?vgnextoid=a690a58e82cc1410VgnVCM10000071d60f89RCRD