Closing Costs When Selling a Home in Ontario

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What Are Closing Costs?

When you sell a home in Ontario, the full amount of the sale price (selling price) is not what ends up in your pocket. Before any money lands in your account, there are several deductions—commonly known as closing costs—that must be paid.

Closing costs are the final financial obligations sellers face when transferring ownership in a real estate transaction. These expenses are deducted from your sale proceeds and cover legal fees, real estate agent commissions, mortgage-related penalties, and other costs.

While buyers generally face more fees upfront in the transactions, sellers should still budget for these expenses to protect their net returns. Understanding exactly what you’re responsible for—well in advance of closing day—and having the right real estate lawyer by your side, ensures you’re prepared and positioned for a smooth transaction.

List of Common Closing Costs

Legal Fees and Disbursements

Real estate lawyers are required in the selling process. They draft and review legal documents, coordinate with the buyer’s lawyer, and ensure that all financial obligations tied to the property are properly discharged.

Legal fees for sellers in Ontario typically range between $1,000 and $2,000 + HST, depending on the complexity of the deal and whether there are additional issues like title corrections or power of attorney.

Some real estate law firms may also charge disbursements—out-of-pocket costs that the lawyer pays on your behalf. These can include title searches, bank charges, courier fees, and admin charges.

We prefer to provide all-inclusive quotes for predictability and transparency to our clients. It gives them the confidence to budget accurately, compare quotes fairly, and avoid unpleasant surprises when it matters most—on closing day.

Choosing an experienced real estate lawyer who can spot issues early is a worthwhile investment—not just a necessary expense.

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Real Estate Commission

The biggest closing cost for most sellers is commission paid to real estate agents. In Ontario, commission typically ranges between 4% and 5% of the final selling price, plus 13% HST. This amount is divided between your listing agent and the buyer’s agent and is deducted from your proceeds on closing day. In other words, the Seller typically pays commission for both Realtors.

For a home that sells at a purchase price of $750,000, a 5% commission plus HST results in $42,375. While many homeowners accept these figures as standard, real estate agent commissions are negotiable. Some sellers consider reduced-commission brokerages or flat-fee models—especially if the market is strong or the home is likely to attract multiple potential buyers.

As with any service, it’s important to weigh cost against value. Experienced real estate agents often provide pricing strategy, marketing exposure, and negotiation skills that can more than pay for themselves.

Mortgage Discharge and Penalties

If your home has a mortgage, your lender must formally discharge it from the title. That means paying off the principal balance, plus, most financial institutions charge a discharge administration fee—typically between $200 and $500. Your lawyer handles the paperwork and ensures the discharge is properly registered.

If your mortgage is with a private lender, that discharge fee can be up to $2,000.

In addition, if you’re selling before your mortgage term expires, you may face a prepayment penalty. This is often the greater of three (3) months’ interest or the Interest Rate Differential (IRD), depending on your lender and rate type. The penalties vary and can add several thousand dollars to your closing costs.

Together, these mortgage discharge fees and penalties can significantly reduce your final proceeds—so it’s wise to contact your lender ahead of time for a payout quote.

Adjustments on Closing

Adjustments are prorated reimbursements for expenses you’ve prepaid or owe for the period around the closing date. Common examples include:

• Property taxes
• Condo maintenance fees
• Unmetered Utilities

If you’ve already paid these amounts beyond the closing date, you’ll be reimbursed by the buyer. Conversely, if there are amounts owed for the period prior to closing, the balance will be deducted from your proceeds.

These adjustments are detailed in the Statement of Adjustments prepared by your lawyer and the buyer’s lawyer. While often minor, they still affect the final amount you receive.

Capital Gains 

If the property you’re selling is your principal residence, any profit from the sale is likely exempt from capital gains tax. This exemption is one of the most important tax benefits available to Canadian homeowners.

However, if the home was used as a rental property, cottage, or second residence—or if you’re a non-resident—you may be liable for capital gains tax. In simple terms:

• 50% of the capital gain (the increase in property value since purchase) is taxable
• The taxable amount is added to your income and taxed at your marginal rate

This is a complex area of tax law and should always be addressed by a qualified accountant. They can calculate your exposure and help you take advantage of available exemptions or deductions. If you’re a non-resident, additional tax withholding rules will also apply.

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Example of Closing Costs

To illustrate how these costs play out, here’s a breakdown for a home sold at $750,000 in Toronto:

These figures vary based on commission rate, mortgage terms, and lawyer/law firm—but they offer a useful framework for planning.

Useful Tips

Negotiating Real Estate Commission

Don’t assume commission is fixed. Many agents are open to reduced rates or alternative pricing structures, especially in a competitive market. You can also explore brokerages offering flat-fee listings or limited service models for less.

You can:

• Negotiate a lower percentage based on the value you are actually receiving
• Use a flat-fee brokerage for listing services
• Ask about bundled services like staging, photography, and marketing

The key is to balance savings with service—sometimes it’s worth paying full commission for an agent who can maximize your sale price and navigate complex negotiations.

Remember, commission should reflect both service and results. Experienced agents can often help you attract more potential buyers and negotiate a stronger selling price—offsetting the commission expense entirely.

Legal Fees – Value vs. Cost

Legal fees can vary widely. Before choosing a law firm based on the lowest quote, consider the following:

• Don’t just shop by lowest quote — look for value. A $300 difference may reflect the real estate lawyer’s experience, responsiveness, and attention to detail.
• Ask whether disbursements are included in the quote.
• Use tools like our Legal Fee Calculator to estimate total legal costs in advance.

Legal issues—especially those involving title issues —can delay or derail your closing. Working with an experienced real estate lawyer ensures that your interests are protected and that the process moves efficiently.

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Summary

Closing costs in Ontario are an essential part of every real estate sale. From real estate agent commissions and legal fees to mortgage discharge penalties and adjustments, knowing what to expect ensures you’re financially prepared and avoids last-minute surprises.

Budgeting 6% to 7% of the purchase price is a reliable starting point. With the right information—and the right legal team—you can navigate the sale process confidently and protect your bottom line.

Work with a knowledgeable real estate lawyer who can explain each step, advocate for your interests, and ensure your transaction closes smoothly and on time.

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If you have questions about Closing Costs When Selling a Home in Ontario or any other real estate legal matter, we’re here to help. As real estate law specialists, our mission is to provide the clarity and direction you need to protect your property rights.

Contact us today to schedule a free consultation.

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