Planning to Sell Your Home This Year? Don't Overlook Closing Costs

If you're preparing to sell your home, you're likely keeping an eye on market trends and calculating potential profits. However, before you focus solely on how much you'll make, it's essential to account for closing costs—the often-overlooked fees and expenses associated with completing a real estate transaction.

These costs can impact your bottom line, so understanding them early can help you plan better. Here's what you need to know about seller closing costs in Ontario.

Let's take a closer look at closing costs and an overview of the fees that will be deducted from your overall profit.

What Are Closing Costs?

Closing costs are fees and expenses that come into play when a property changes ownership. For sellers in Ontario, these costs are generally deducted from the sale proceeds, meaning you won't need to pay them upfront. While buyers typically face higher closing costs, sellers still need to prepare for specific expenses.

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Key Closing Costs for Sellers in Ontario

1. Legal Fees

Hiring a real estate lawyer is mandatory in Ontario. Lawyers handle title transfers, financial adjustments, and documentation to ensure the transaction complies with provincial and municipal regulations.

• Estimated Cost: $800–$2,500

2. Mortgage Discharge Fees

If you have an outstanding mortgage, your lender will charge a fee to discharge it. Additionally, if you’re paying off your mortgage before the term ends, you may face a prepayment penalty, calculated as either:

• Three months’ interest, or

• The interest rate differential (IRD).

• Estimated Cost: $200–$500 (plus potential prepayment penalties)

  3. Land Transfer Tax

  Transfer Taxes In Ontario are referred to as Land Transfer Taxes (LTT) and are applied by provincial or municipal governments when a property changes ownership. This is a one-time tax payable by the buyer at the time of closing. The amount is calculated based on the purchase price of the property and follows a tiered structure:

• 0.5% on the first $55,000

• 1.0% on $55,001 to $250,000

• 1.5% on $250,001 to $400,000

• 2.0% on $400,001 to $2,000,000

• 2.5% on amounts over $2,000,000 (for single-family residences).

  If the property is in Toronto, an additional Municipal Land Transfer Tax applies at similar rates. First-time homebuyers in Ontario can qualify for a rebate of up to $4,000 on the provincial LTT and an additional rebate on the Toronto Municipal LTT (if applicable).

4. Prorated Property Taxes

As the seller, you're responsible for property taxes up to the closing date. If you've already paid property taxes for the year, the buyer will reimburse you for their share of the time they occupy the property.

• Estimated Cost: Varies based on local property tax rates

5. Condo or HOA Fees

If your property is part of a condominium or homeowners' association, you must ensure fees are up to date. Buyers may also request a status certificate, which outlines the property’s financial standing and rules.

• Estimated Cost: $100–$200 for a status certificate

6. Other Potential Costs

Depending on your property and sale terms, you may incur additional expenses for:

• Repairs or renovations to address inspection issues

• Staging costs to make your home more appealing

• Clearing liens or resolving ownership disputes

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Preparing for Closing Costs

Statement of Adjustments

A few days before closing, your lawyer will provide a Statement of Adjustments—a detailed document outlining:

• Financial adjustments for property taxes, utilities, and fees up to the closing date

• The net proceeds you’ll receive after deductions

This document provides clarity on the financial aspects of the transaction, helping you understand exactly what to expect.

Seller’s Net Sheet

Earlier in the process, your real estate agent can prepare a seller’s net sheet. This unofficial estimate breaks down potential closing costs and calculates your anticipated net proceeds. While not final, it’s a useful tool for budgeting and setting realistic expectations.

Smoothly Navigating Closing Day

Closing day marks the final step in selling your home. By collaborating with a knowledgeable real estate agent and a trusted lawyer, you can ensure all financial obligations are addressed. With proper preparation, you’ll avoid unexpected surprises and move confidently to the next chapter.

Final Thoughts

Understanding and planning for closing costs is crucial for a successful home sale in Ontario. From legal fees to mortgage discharge costs, knowing what to expect will help you make informed decisions and maximize your profit. With the right professionals by your side, you can navigate the process smoothly and focus on your next move.