There are quite a few fees involved in buying a home. If you’re planning to purchase a property in Ontario, it’s important to be fully aware of the additional costs, known as mortgage closing costs, before you start looking at houses. Knowing in advance what these costs will be will help you plan your down payment and avoid any unpleasant surprises that could hinder the sale. Plan on spending at least 1.5 percent of the purchase price on mortgage closing, though setting aside as much as 2 percent is recommended to be safe. Read on for more information as to what goes into the mortgage closing costs.

Legal Fees & Disbursements

Lawyers aren’t cheap and, unfortunately, you need them to complete the purchase. The lawyer will be involved in drafting the title deed, preparing the mortgage, conducting searches, and other tasks. Disbursements for registrations, searches, and supplies will depend on which lawyer you use. Always ask for the worst-case scenario to get the upper-end value of these services. Typically, if the property costs $200,000, you can expect to spend between $800 and $1,200 on legal fees and disbursements.

Land Transfer Tax

The land transfer tax is paid at the time of closing the mortgage when the property is transferred from the previous owner to you. The tax is determined by the price of the home, whether you’re a first-time buyer, and which part of Ontario you live in. Some cities, like Toronto, charge an additional land transfer tax that increases the rates.

Mortgage Insurance

You shouldn’t forget to budget for mortgage insurance on your new property. Insurance costs will include mortgage insurance, homeowners insurance, mortgage life insurance, and title insurance.

Property Tax &  Prepays

property tax

During mortgage closing, the lawyer of the buyer will confirm that all of the local taxes have been paid and are currently up to date. If they are, a Tax Certificate will be issued. Once the certificate is issued, adjustments are made with the buyer reimbursing the seller for any prepaid taxes. If the taxes are not up to date, the seller will be required to pay them off using the proceeds from the sale.


Most lenders require an appraisal to be done on the property before they will disburse mortgage money. This helps ensure that the property is worth what the bank is lending you. Most appraisals cost between $175 and $285 depending on the area and the size of the home or land.

Home Inspection

A home inspection is often considered optional and is done by the purchasers to verify that the home is in good condition. The scope and detail of this inspection vary but most inspectors look for major problems and provide an estimated cost to repair. The inspection will cost you around $300, but if any major repairs are needed, you may be able to use that information to negotiate further with the seller, saving you thousands of dollars in the long run.

Interest Adjustments

If your mortgage is due on the first day of each month, but you close after that day, your lender will charge you an interest rate on the money up until the first payment date. This interest is called the Interest Adjustment. Your lender will calculate this amount for you. Mortgages are paid in arrears and your first payment won’t be due until after you move in.

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