You’ve successfully sold your home. After navigating the market, perhaps even handling multiple offers, you have a firm deal at a fantastic price. As you look forward to the closing date, it’s crucial to understand that the final sale price is not the amount of money that will land in your bank account.

Before you receive your proceeds, a number of expenses known as “closing costs” will be deducted. For sellers in Ontario, being aware of these costs from the very beginning is key to accurately calculating your net proceeds and planning your next financial steps. This guide will provide a clear, itemized breakdown of the closing costs you can expect to pay when selling your home.

1. The Elephant in the Room: Real Estate Commission

For most sellers, this is the single largest closing cost. The real estate commission is the fee you pay to the brokerage(s) for the professional services rendered in successfully selling your property. This fee covers a wide range of services, including marketing your home, coordinating showings, vetting buyers, skillfully negotiating offers, and managing all the complex paperwork.

  • How it’s Calculated: The commission is a percentage of the final sale price, which you agree upon with your agent when you sign the listing agreement. The total commission typically ranges from 3.5% to 5% in Ontario.
  • The Co-operative Split: It’s important to remember that this total commission is not just for your agent. It is split between your listing brokerage and the “co-operating” brokerage that represents the buyer. Offering a competitive commission to the buyer’s agent is a key part of the marketing strategy, as it incentivizes thousands of agents to show your property to their clients.
  • Don’t Forget HST: In Ontario, you must pay HST (13%) on top of the total real estate commission.

On a $900,000 sale with a 5% commission, the cost would be $45,000 + $5,850 (HST) = $50,850.

You are required to have a real estate lawyer represent you to close the sale. Your lawyer handles the critical final steps of the transaction, including:

  • Reviewing the Agreement of Purchase and Sale.
  • Preparing the legal documents to transfer the property’s title to the buyer.
  • Receiving the sale funds from the buyer’s lawyer.
  • Using those funds to pay off your existing mortgage and any other liens against the property.
  • Providing you with a detailed Statement of Adjustments and the final net proceeds of the sale.

For a standard sale, a seller’s legal fees in Ontario typically range from $800 to $1,500.

3. Paying Off Your Mortgage: Discharge and Potential Penalties

If you have an existing mortgage on the property you are selling, it must be paid off in full from the sale proceeds. This process involves a couple of potential costs.

  • Mortgage Discharge Fee: This is an administrative fee charged by your lender to remove their mortgage charge from your property’s title. This fee usually ranges from $250 to $450.
  • Mortgage Prepayment Penalty: This is a crucial and often underestimated cost. If you are in a “closed” mortgage and are selling before your term is up, your lender will almost certainly charge you a significant prepayment penalty. The penalty is typically calculated as either three months’ interest or the Interest Rate Differential (IRD), whichever is greater. This penalty can easily amount to thousands or even tens of thousands of dollars. It is essential to call your lender before you list your home to find out the exact penalty amount.

4. Other Potential Costs to Consider

While not all of these are deducted by the lawyer on closing, they are expenses related to the sale that you should budget for:

  • Home Preparation Costs: The money you invested to prepare your home for sale, such as painting, repairs, or landscaping.
  • Home Staging: If you opted for professional staging, this is another marketing investment to account for. You can learn more about if home staging is worth it in Ontario.
  • Moving Costs: The practical expenses of hiring movers or renting a truck.
  • Capital Gains Tax (Important Note): In Canada, you do not pay tax on the profit from selling your principal residence. However, if the property you sold was not your principal residence (e.g., an investment property, a tenanted duplex, or a cottage), you will have to pay capital gains tax. 50% of the capital gain (the profit) is added to your income and taxed at your marginal rate. You must consult with an accountant to understand this tax obligation.

On closing day, your lawyer will orchestrate all these payments. They will use the funds from the buyer to pay the real estate commission, their own legal fees, and your outstanding mortgage balance. The remaining amount—the net proceeds—is then transferred to you. Understanding these seller closing costs from the outset ensures you have a clear and realistic picture of your financial bottom line, allowing you to celebrate your successful sale without any surprises.