PLAN THE CASH, NOT JUST THE MORTGAGE
The Down Payment Isn’t the Only Money You Need to Buy a Home
Understand the deposit, down payment and closing costs so you can plan for the cash you’ll actually need to buy.
KNOW WHAT YOU’RE SAVING FOR
Three different amounts.
Three different jobs.
These terms get used together so often that they can start to sound interchangeable. They’re not. Understanding the difference makes it much easier to know how much cash you actually need and when you’ll need it.
Deposit
The deposit is paid according to the Agreement of Purchase and Sale, usually shortly after your offer is accepted. It shows your commitment to the purchase and is normally credited toward your down payment on closing.
Down Payment
Your down payment is the portion of the purchase price that isn’t covered by your mortgage. The deposit you already paid normally counts toward this amount.
Closing Costs
These are the additional costs required to complete the purchase, such as land transfer tax, legal expenses and other transaction-related amounts. They are separate from your down payment.
If your total down payment is $40,000 and you already paid a $20,000 deposit, you do not need another $40,000 for the down payment. You would normally need the remaining $20,000 of your down payment, plus your closing costs.
BUILD IN SOME BREATHING ROOM
Plan for more than the down payment
A useful rule of thumb is to set aside roughly 1.5% to 4% of the purchase price for closing costs, in addition to your down payment.
That range is intentionally broad. Your actual costs can change depending on the purchase price, whether you qualify for first-time buyer relief, your legal costs, mortgage setup, property adjustments and the type of home you’re buying.
WHERE THE EXTRA MONEY GOES
The closing costs you’re most likely to run into
You probably won’t pay every possible fee associated with buying a home, but most buyers will see some combination of the costs below.
Ontario land transfer tax
Usually one of the largest closing costs. The amount depends on the purchase price, and eligible first-time buyers may qualify for a refund.
Legal fees, title insurance & disbursements
Your lawyer handles the legal transfer of the property, mortgage registration and closing documents. Their invoice may also include title insurance and transaction-related disbursements.
Mortgage-related costs
Depending on your financing, there may be appraisal costs, lender or broker fees, or tax owing on mortgage loan insurance premiums.
Adjustments, insurance & moving
Property taxes, condo fees or other prepaid expenses may be adjusted on closing. You’ll also want to account for home insurance, movers and basic setup costs.
Inspections & property-specific expenses
A general home inspection may be only part of the picture. Some homes require additional testing or specialist review depending on the property.
Not every buyer will have every cost. The point is to know what may be coming so none of it feels like a surprise later.
ONE OF THE BIGGER CLOSING COSTS
Ontario land transfer tax can add up quickly
Land transfer tax is based on the purchase price and is paid when the property changes ownership.
In Windsor & Essex County, buyers pay the Ontario land transfer tax only. There isn’t an additional municipal land transfer tax like there is in Toronto.
0.5% on the first $55,000
1.0% on the portion from $55,000 to $250,000
1.5% on the portion from $250,000 to $400,000
2.0% on the portion above $400,000
2.5% on the portion above $2,000,000 for qualifying residential property
First-Time Buyer?
Eligible Ontario first-time buyers may receive a refund of up to $4,000.
That can reduce the land transfer tax significantly, but eligibility rules matter, so your lawyer should confirm what applies to your purchase.
PUTTING THE NUMBERS TOGETHER
Here’s what the cash could look like on a $500,000 purchase
The important part is that $20,000 deposit is normally part of the $50,000 down payment. It isn’t another $20,000 on top of it. The exact closing amount will vary from one purchase to another, and your lawyer will confirm the final amount required before closing.
$500,000
Purchase price
$20,000
Deposit already paid
$30,000
Remaining down payment needed on closing
Plus closing costs
Land transfer tax, legal costs, adjustments and any other applicable expenses.
THE FINAL NUMBER COMES LATER
Plan with estimates. Close with confirmed numbers.
This page is meant to help you build a realistic budget before you buy. The exact amount you’ll need on closing depends on the property, your financing and the details of the transaction. Your mortgage professional can confirm financing-related costs, and your lawyer will provide the final amount required to complete the purchase.
This site provides general information only and is not legal, financial or professional advice. Real estate decisions are specific to your situation. Always verify important details with the appropriate professionals.