Getting a mortgage is hard. Real estate prices in Canada, and especially in the Greater Toronto Area, are through the roof. The last thing you need in this situation is a ton of extra expenses just to cover mortgage closing costs Ontario.
There’s a pretty big chance that you’ll never buy anything more expensive than a house. Maybe your lifestyle will eventually turn you into a billionaire and you’ll buy a megayacht someday, but realistically — a house is the most expensive purchase the majority of Canadians will ever make.
Mortgage in this case is, most of the time, essential. In case you didn’t try to calculate your future payments and still have some colored hair — we’re ready to turn them grey right now: mortgage closing costs in Ontario are through the roof as well. The good news, however, is that we KNOW how to cut them.
Real Mortgage Closing Costs in Ontario
Statistically speaking, you’re most likely to spend from 1,5% to 4% of the house price in JUST mortgage closing expenses.
With an average house price sitting at around $680,000, your mortgage closing costs in Ontario can be about $10,200 to $27,200.
Ok, you’re not buying a BIG house, you just want a roof over your head. Let’s take a look at cheaper options:
- Deep River, just 200km from Ottawa: average house price is $317,000 — closing costs are between $4755 and $12,680;
- Thunder Bay, the biggest it gets in Northwestern Ontario: average house price is around 268,000 — closing costs are between $4020 and $10720;
- Sarnia, closer to Huron lake: average house price is at $198,000 — closing costs are from $2970 to $7920.
The cheapest we could find — a 100 square feet bungalow in Greater Sudbury — is listed for $40.000, which places your smallest possible mortgage closing costs Ontario somewhere between $600 and $1600. Now THAT’s a deal.
Of course, it’s not THAT simple. We can guarantee that you won’t get away with just $600. Mortgage closing costs consist of multiple factors — and some of them are, unfortunately, essential.
What Mortgage Closing Costs Include
Everything, from the very beginning, would be the shortest answer. But here’s the long one that explains more:
- Realtor’s commission;
- Appraisal costs;
- Home inspection cost;
- Lawyer cost;
- Title insurance cost;
- Land transfer tax (LTT) cost;
- Insurance (namely, fire insurance).
Looks like a lot of complicated stuff and you still don’t understand where the money goes? Now — a little explaining in better detail for each of the points.
Realtor’s Commission in Ontario: 1% to 5% of the purchase price
A realtor can be your helpful guide in the process of buying a house. Yes, you mostly need them when you SELL a house, but in today’s crazy market — their experience can be useful in the earliest stages of the process;
Home Appraisal cost in Ontario: $300 to $500
Yes, a home appraisal is a must because that’s the only proof you have that the house you’re buying is worth it. It’s not for you — it’s for the lender. And you still pay for it. Also, it’s a good way to protect yourself from malicious actors. If they tell you to buy a house in questionable condition for $200 less because it’s “a good deal” — just politely decline and add it to the list of your future jokes about your bad taste in choosing real estate agents. The typical cost of home appraisals is somewhere between $300 and $500.
Home Inspection cost in Ontario: $300 to $400
It’s the last thing you want to hear when you decide to buy your first house, but it’s true because appraisers don’t do anything more than verify the structure. They check the foundation, siding, roofing materials, etc. But they can’t tell you whether there are mold issues in the basement or bugs in the attic. So, a home inspection is a must for a first-time buyer — if you want a home that works for you. While the home appraisal is mostly for the bank, the home inspection is something for YOU. Negotiate the price, avoid “money pit” houses, save your future self some nerve cells. It’s worth it.
Lawyer’s help in real estate deals in Ontario: $1200 to $3000
Ok, this one is a little tricky. You can represent yourself and sign the papers without a lawyer, if you’re aware of the risks (not recommended). Or you can hire one and pay for their experience. Of course, it’s up to you — but think about it: a legal representative can help you with taking care of all the paperwork for closing costs in Ontario so you don’t have any extra surprises later. Is it a deal? That’s your call. But, anyway, you need to pay the lawyer.
Title Search cost in Ontario: $45, on average
“Title Search” is a fancy term for “checking if there’s a mortgage on the house you’re about to buy”. Some sellers don’t want to disclose that information and they pay a fine. It’s a bad way to do it — because they can end up in jail. But, as we already KNOW from our previous experience with mortgage closing costs Ontario — some people don’t really care about getting their hands dirty.
Title Insurance in Ontario: $500 to $1000
Probably the most important one, especially considering the previous point. Title insurance serves as protection for both you and the lender. Title insurance protects your ownership rights to your home if someone does some weird funny stuff with the title. If you buy a house that doesn’t belong to you and it’s not registered yet, the odds are that you’ll never get it back.
LTT, or land transfer fees in Ontario: up to 2% of the purchase price (between $2000 and $8000 on average)
LTT is a tax that the government of Ontario applies to all land transfers in the province. It almost always comes with a fee — and usually quite a high one. But it’s not always bad — you CAN get a mortgage with title insurance and LTT fees deducted. So, if you have a good deal, keep an eye out for that. Get ready to pay it TWICE in Toronto.
Fire insurance cost in Ontario: $600 to $1700 (on average)
Fire insurance ain’t cheap. To be precise, it’s about $600 to $1700 per year. Make sure that you have the results of a recent home inspection to show to the insurance company — or they’ll make you pay for their own inspection as well. Of course, you can skip it — fire insurance is NOT required by law in Ontario — but it significantly reduces your chances to get approval. Most lenders in Ontario WILL require fire insurance (not because they’re so kind and caring, but because you’ll still need to pay, even if the house will turn to ashes).
How to Cut Mortgage Closing Costs Ontario
While there’s no secret technique, you can just eliminate steps that you find unnecessary. Remember that each step dropped off the list raises your risks, and if something goes wrong with your mortgage — you can lose WAY more money. However, if you really, really need to cut these expenses — here’s what you can do:
- Don’t hire a realtor. You can do it all on your own by reading some guides Online. Sounds silly, but MANY people save on realtors;
- You can’t skip home appraisal, but you can do your home inspection yourself. It’s not THAT hard. You also can ask your experienced friends or family members to help you;
- No lawyer! We die like real men (between the lines of fine print in the contract). It’s the LAST thing we recommend, but still — you’re not legally required to hire them, so you can skip this part;
- Title research? Title insurance? Test your luck with these two. Not ALL people are malicious scam actors, the world (and possibly Ontario, even though it’s less likely in the real estate field) is full of honest guys as well. If something happens or surfaces in the worst possible moment — that’s how the Universe wanted it to be.
That’s it! In short, do everything you’re not legally required to do, yourself, and don’t pay anyone a penny. While it’s not the smartest thing you can do, it’s definitely effective in cutting mortgage closing costs in Ontario.
PRO Tip
Don’t be radical, the mortgage closing process was never about “it’s all or nothing” approach. Take a look at the professionals you may hire and scroll your phone book, or maybe talk to your friends or parents — maybe you can eliminate a few points simply by relying on your closest circle. It would be way smarter.