When buying a home in Ottawa, you need more than the down payment. You also need money for land transfer tax, legal work, inspections and other expenses that arise before or on closing day.
As a general planning guideline, the Canada Mortgage and Housing Corporation estimates that closing costs can range from 1.5% to 4% of the purchase price. The actual amount depends on the price and type of property, your mortgage, whether you qualify for rebates and the adjustments required at closing.
For a $700,000 Ottawa home, 1.5% to 4% represents approximately $10,500 to $28,000. This is a broad planning range, not a quote. Your lawyer and lender can provide more accurate figures for your transaction.
Are the Deposit, Down Payment and Closing Costs the Same?
No. Buyers often confuse these three amounts.
- Deposit: Paid after the offer is accepted, according to the Agreement of Purchase and Sale. It shows the buyer’s commitment and is normally credited toward the purchase price on closing.
- Down payment: The portion of the purchase price that is not covered by the mortgage. The deposit normally forms part of it.
- Closing costs: Additional expenses associated with completing the purchase. These are generally separate from the down payment.
For example, if your required down payment is $50,000 and you have already paid a $25,000 deposit, the deposit is normally credited toward that $50,000. It is not an additional $25,000 closing expense.
1. Ontario Land Transfer Tax
Land transfer tax is usually the largest closing cost for an Ottawa buyer. Unlike Toronto, Ottawa does not charge a second municipal land transfer tax. Ottawa buyers pay the provincial Ontario tax.
Ontario calculates land transfer tax using marginal rates:
- 0.5% on the first $55,000
- 1.0% on the portion above $55,000 up to $250,000
- 1.5% on the portion above $250,000 up to $400,000
- 2.0% on the portion above $400,000 up to $2 million
- 2.5% on the portion above $2 million when the property contains one or two single-family residences
| Ottawa Purchase Price | Ontario Land Transfer Tax | After Maximum $4,000 First-Time Buyer Refund |
|---|---|---|
| $500,000 | $6,475 | $2,475 |
| $700,000 | $10,475 | $6,475 |
| $900,000 | $14,475 | $10,475 |
These examples assume the full purchase price is subject to the standard residential rates. Your lawyer will calculate the amount for your transaction.
2. First-Time Home Buyer Land Transfer Tax Refund
Eligible first-time home buyers may receive an Ontario land transfer tax refund of up to $4,000. If the calculated tax is $4,000 or less, an eligible buyer may pay no provincial land transfer tax. If it is higher, the refund reduces the amount owing.
Eligibility rules apply to the buyer, their spouse and how the property will be occupied. Do not assume you qualify based only on never having purchased a home in Canada. Previous ownership of a home anywhere in the world and a spouse’s ownership history can affect eligibility.
Your real estate lawyer should confirm your eligibility and normally applies the refund as part of the closing process.
Eligibility rules apply to the buyer, their spouse and how the property will be occupied. Do not assume you qualify based only on never having purchased a home in Canada. Previous ownership of a home anywhere in the world and a spouse’s ownership history can affect eligibility.
Your real estate lawyer should confirm your eligibility and normally applies the refund as part of the closing process.
3. Legal Fees, Disbursements and Title Insurance
A real estate lawyer handles the legal transfer of the property and coordinates the funds required for closing. The legal bill may include:
- The lawyer’s professional fee
- Land registration and search charges
- Courier, software and administrative disbursements
- Title insurance
- Applicable taxes
Fees vary by law firm and by the complexity of the purchase. A condominium, new build, private mortgage, title issue or extended closing may require additional work. Ask for a written quote that explains what is included instead of comparing only the advertised base fee.
Title insurance is commonly arranged through the lawyer. It can protect against certain title-related risks, but it does not replace a home inspection or provide general coverage for the property’s physical condition.
4. Home Inspection
A home inspection is normally paid when the inspection is completed, not on closing day. Even so, it should be included in the total cash you set aside for the purchase.
The cost depends on the property’s size, age and location, as well as the inspector and scope of work. Rural homes may require separate well, water-quality or septic inspections. Specialized inspections may also be recommended when there are concerns involving the structure, electrical system, mould or other components.
Before submitting an offer, review which conditions you may need in an Ottawa home offer. An inspection condition can provide time to complete this work before the purchase becomes firm.
5. Mortgage Appraisal
Your lender may require an appraisal to confirm that the property supports the mortgage amount. Some lenders cover this cost, while others charge it to the buyer.
An appraisal is completed for the lender and is not the same as a home inspection. It assesses value for financing purposes rather than providing a detailed review of the home’s physical condition.
If the appraisal comes in below the purchase price, the lender may reduce the amount it is willing to finance. The buyer may then need a larger down payment or another financing solution.
6. Mortgage Loan Insurance and Ontario Tax
If your down payment is less than 20%, mortgage loan insurance will usually be required. According to CMHC’s mortgage loan insurance premium guidance, the insurance premium may be added to the insured mortgage rather than paid entirely in cash.
Ontario applies 8% provincial sales tax to the mortgage insurance premium. This tax cannot be added to the mortgage and must be paid as part of the closing funds.
For example, a mortgage insurance premium of $20,000 would create an additional $1,600 in Ontario sales tax due in cash. The actual premium depends on the mortgage amount, loan-to-value ratio and applicable insurer rules.
7. Property Tax and Utility Adjustments
The seller may have prepaid property taxes, condominium fees, fuel or certain utilities beyond the closing date. If so, the buyer may need to reimburse the seller for the applicable portion.
These adjustments do not represent new fees charged by the seller. They allocate property-related expenses between the buyer and seller according to the date each party owns the home.
The amount can vary significantly depending on the closing date and what has already been paid. Your lawyer will show the final adjustments on the statement of adjustments before closing.
8. Home Insurance
Most mortgage lenders require proof of property insurance before releasing mortgage funds. The policy normally needs to take effect on the closing date.
The premium depends on the property, coverage and insurer. Older electrical systems, previous claims, oil heating, wood-burning appliances or flood-related concerns can affect availability and cost. Contact an insurer before your financing or insurance condition expires rather than waiting until closing week.
9. Condominium Costs
Condo buyers may have expenses that do not apply to a freehold home, including:
- Status certificate costs, depending on how it is ordered and negotiated
- Legal review of the condominium documents
- Adjustments for prepaid condominium fees
- Move-in or elevator deposits charged by the corporation
Some deposits are refundable, but buyers still need the cash available at the required time.
10. New-Build Closing Costs
New-build purchases can include additional charges set out in the builder’s agreement. Depending on the project, these may involve development-related charges, utility connections, grading deposits, Tarion enrolment, assignment-related costs, condominium adjustments or HST-related amounts.
Builder agreements are not all the same. Have a real estate lawyer review the agreement during the permitted review period and explain which adjustments are capped, which are not and what may be payable on closing.
Eligible first-time buyers purchasing a new or substantially renovated home may also qualify for the federal first-time home buyers’ GST/HST rebate. Eligibility and the way a rebate is credited depend on the transaction, so obtain tax and legal advice for the specific purchase.
Other Costs That May Apply
Depending on the property and buyer, additional costs may include:
- Moving and storage
- Utility connections
- Immediate repairs or renovations
- Appliances and window coverings
- Survey or location documentation
- Well and septic testing
- Bridge financing
- Interest adjustments
- Non-Resident Speculation Tax for certain foreign buyers
These items may not all appear on the lawyer’s closing statement, but they still affect how much cash you need to complete the move safely.
How Much Should You Save for Closing Costs?
Using 1.5% to 4% of the purchase price is a reasonable starting point, but it should not replace a property-specific estimate.
Before making an offer, ask:
- What is the estimated Ontario land transfer tax?
- Do I qualify for the first-time buyer refund?
- Will I need insured financing and pay tax on the insurance premium?
- What does my lawyer’s quote include?
- Are there condo, rural-property or builder-specific costs?
- How much should I keep available for tax and utility adjustments?
Do not use every dollar you have for the down payment. Keep your expected closing costs and an additional emergency buffer accessible. Also review these common first-time home buyer mistakes in Ottawa before finalizing your budget.
Plan Your Ottawa Home Purchase With Real Numbers
Online estimates are useful for early planning, but the final amount depends on your purchase price, mortgage and property. Your REALTOR®, lender and lawyer should help you confirm the numbers before you commit to an offer.
The West Team helps Ottawa buyers understand the full cost of a purchase, prepare a realistic offer strategy and coordinate the steps leading to closing. For help planning your Ottawa home purchase, contact us at 613-699-7918.
Disclaimer: This article provides general information only and does not replace legal, tax, lending, insurance or financial advice. Rates, programs and eligibility rules can change. Confirm the costs and requirements that apply to your transaction with the appropriate professionals.
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