As you prepare to close on a real estate transaction in Toronto, it’s important to be aware of the various costs that you’ll incur on closing day. These costs can add up quickly, so it’s essential to budget appropriately to avoid any surprises. In this blog post, I’ll discuss the most common closing day costs in Toronto, including real estate commission fees, legal fees, disbursements, mortgage discharge fees, land transfer tax, title insurance, home inspection fees, appraisal fees, moving expenses, property taxes, utility bills, HST, and capital gains tax.
Real Estate Commission Fees
Real estate commission fees are the fees paid to your real estate agent for their services in helping you sell or buy a property. In Toronto, the standard real estate commission is 5% of the sale price of the property, split equally between the buyer’s and seller’s agents. However, the commission rate is negotiable, and you have negotiated a lower rate with your agent.
Legal Fees
Legal fees are the fees charged by your lawyer or notary for their services in handling the legal aspects of your real estate transaction. Legal fees in Toronto can vary depending on the complexity of the transaction, but you should budget between $1,500 and $2,500 for legal fees. Be sure to source out a reputable lawyer well before your closing date.
Disbursements
Disbursements are the out-of-pocket expenses that your lawyer or notary incurs in handling your real estate transaction. These expenses can include title searches, registration fees, and other charges. In Toronto, you should budget around $500 for disbursements.
Mortgage Discharge Fees
If you have an existing mortgage on the property you’re selling or refinancing, you’ll need to pay a mortgage discharge fee to release the mortgage from the property. This fee will range in cost depending on your lender and the mortgage you are discharging.
Land Transfer Tax
In Toronto, land transfer tax is a significant closing day cost. The amount of land transfer tax you’ll need to pay depends on the purchase price of the property. The tax rate is tiered, with a higher rate applied to the portion of the purchase price that exceeds each tier. For example, if you’re buying a property for $800,000 in Toronto, you’ll pay $24,475 in land transfer tax. You can use a land transfer tax calculator to estimate your land transfer tax.
Title Insurance
Title insurance protects you against any defects in the property’s title, such as liens, encroachments, or other issues that could affect your ownership of the property. Title insurance is mandatory in some provinces, including Ontario, and typically costs around $500.
Home Inspection Fees
A home inspection is an important part of the buying process, as it can uncover any potential issues with the property. Home inspection fees in Toronto can vary depending on the size and age of the property, but you should budget between $400 and $800 for a home inspection.
Appraisal Fees
If you’re obtaining a mortgage to purchase the property, your lender may require an appraisal of the property. The cost of an appraisal in Toronto can range from $300 to $500.
Moving Expenses
Moving expenses can vary depending on the distance you’re moving and the amount of furniture and belongings you have. If you’re moving locally in Toronto, you should budget around $1,000 – 4000 for moving expenses based on the number of rooms moved. However, if you’re moving long-distance, the cost can be significantly higher.
Property Taxes
If you’re purchasing a property in Toronto, you’ll be responsible for paying property taxes. Property tax rates in Toronto can vary depending on the property’s location and assessed value. You can use the City of Toronto’s property tax calculator to estimate your property tax.
Utility Bills
Utility bills, such as hydro, water, and gas, are typically the responsibility of the property owner. However, if you’re purchasing a property, you may need to pay a prorated amount of the utility bills for the time period between the closing date and the end of the billing cycle.
HST
If you’re purchasing a new construction property or a property that has been extensively renovated, you may be required to pay HST on the purchase price. HST is calculated as a percentage of the purchase price and can add a significant amount to your closing costs.
Capital Gains Tax
If you’re selling a property, you may be subject to capital gains tax. Capital gains tax is calculated based on the difference between the purchase price and the sale price of the property. However, there are some exemptions and deductions that may reduce your capital gains tax liability. It’s important to consult with a tax professional to understand your capital gains tax obligations.
Conclusion
Closing day costs in Toronto can add up quickly, so it’s important to budget appropriately to avoid any surprises. By understanding the various closing day costs, you can ensure that you’re prepared to cover these expenses and complete your real estate transaction without any issues. To minimize your costs, it’s important to work with an experienced real estate agent and lawyer who can help you negotiate the best possible terms and ensure that your transaction goes smoothly.
