The Full Cash Needed at Closing, Line by Line

The rule of thumb, and why it isn't the whole answer

The down payment is the number everyone plans around. It isn't the only cash a purchase needs on closing day — and the gap between the two catches people who budgeted carefully for everything except this.

The Financial Consumer Agency of Canada puts closing costs at roughly 1.5% to 4% of the purchase price, on top of the down payment, and names home inspection fees, legal fees, property tax adjustments and title insurance as the recurring categories. On a $650,000 purchase, that range alone is somewhere between $9,750 and $26,000 — before land transfer tax, which is usually the single largest line item, is even added in.

The width of that range is the point. A straightforward resale purchase with no surprises tends to sit toward the lower end; a purchase with a longer title search, an unusually complex survey, or adjustments for prepaid utilities and property tax the seller has already covered can push toward the higher end. Treating 1.5% as the number to plan around, rather than the range, is how buyers end up short at the lawyer's office.

Ontario's land transfer tax, by the bracket

Ontario charges land transfer tax in brackets, not as one flat percentage of the price. According to the Ontario Ministry of Finance, the bands are: 0.5% on the portion up to $55,000; 1.0% on the portion from $55,001 to $250,000; 1.5% on the portion from $250,001 to $400,000; and 2.0% on the portion above $400,000 (2.5% above $2,000,001, for single-family and dual-family homes).

Worked through on a $650,000 purchase: $275 on the first bracket, $1,950 on the second, $2,250 on the third, and $5,000 on the portion above $400,000 — a total of $9,475, due on closing, in cash or through your lawyer's trust account, not financed as part of the mortgage.

The first-time buyer rebate against it

A qualifying first-time buyer can claim a refund of up to $4,000 against Ontario's land transfer tax, per the Ontario Ministry of Finance — which, worked through the brackets above, means no provincial land transfer tax at all on the first $368,000 of a home's value. On the $650,000 example, the $9,475 owed drops to $5,475 once the rebate is applied.

The eligibility rules are specific: you must be at least 18, you must never have owned an eligible home anywhere in the world, and for agreements signed after November 14, 2016 you must be a Canadian citizen or permanent resident. If you have a spouse, their prior ownership can disqualify you too — unless it happened before they became your spouse. You have to occupy the home as your principal residence within nine months of the transfer, and apply for the refund within 18 months of registration.

The CMHC premium tax that can't be added to your mortgage

This is the piece that most often takes a first-time buyer by surprise, because it looks at first like it should be financed the same way the mortgage itself is.

If your down payment is under 20%, your mortgage needs default insurance, and CMHC's premium runs from about 0.60% of the loan up to 4.00%, depending on how much you're putting down. That premium is usually added to the mortgage itself, so it doesn't need to be paid up front. The tax on that premium is a different matter: Ontario charges 8% provincial sales tax on the insurance premium, and that tax has to be paid in cash at closing — it cannot be added to the mortgage balance, according to Ratehub.

On a $500,000 purchase with 10% down, the $450,000 mortgage carries a premium of roughly $13,950. The 8% tax on that premium is about $1,116 — a real, unfinanced amount due at the lawyer's office on closing day, separate from everything else on this list. It isn't a large sum next to the rest of a purchase, but it's exactly the kind of line item that gets left out of a mental budget built around "down payment plus legal fees."

Bringing it together

For a first-time buyer putting less than 20% down on an Ontario home outside Toronto, the cash needed on closing day is roughly: the down payment itself, plus land transfer tax net of the rebate if you qualify, plus legal fees, title insurance and adjustments, plus the Ontario tax on your CMHC premium. The home inspection and the appraisal sit outside that list — not because they are optional, but because they are paid weeks earlier, while the offer is still conditional. None of these pieces can be skipped or estimated away, and only some of them can be financed.

Our First Home Hub walks through the down payment and program side of a first purchase in more detail, and the Buying a Home page's "what to have ready" section covers the home insurance binder your lender will also want lined up before closing.

The safest way to plan is backward from a real number, not a rule of thumb. Get an actual quote for legal fees and title insurance once you're seriously looking, ask what the land transfer tax works out to on the specific price range you're considering, and confirm with your lender directly whether default insurance applies to your file and what the Ontario tax on it will come to. A rule of thumb is a starting point for a conversation, not a substitute for the numbers your own purchase will actually produce.