Understanding the Closing Costs for Buying or Selling a Home in Ottawa

Buying or selling a home in Ottawa involves more than just the purchase price or selling value—there are additional costs that many buyers and sellers don’t anticipate. Closing costs, which include everything from legal fees to taxes, can add up and significantly impact your budget. This guide will break down the key closing costs for both buyers and sellers in Ottawa, helping you plan ahead and avoid surprises on closing day.

What Are Closing Costs?
Closing costs are the fees and expenses that must be paid when a real estate transaction is finalized. These costs vary depending on whether you’re buying or selling a home and the specifics of your transaction.

Closing Costs for Ottawa Home Buyers

1. Land Transfer Tax

• Land Transfer Tax is a provincial tax paid by the buyer when purchasing a property.

• In Ontario, the amount is calculated based on the purchase price, with the first $55,000 taxed at 0.5%, and the rate increasing as the price rises.

First-Time Home Buyer Rebate:
If you’re a first-time home buyer, you may be eligible for a rebate of up to $4,000 on this tax, which can significantly offset your costs.

2. Legal Fees

• Buyers are required to hire a lawyer to handle the transfer of the property, review contracts, and ensure there are no liens on the property.

• Expect to pay $1,500–$2,500 in legal fees, depending on the complexity of your transaction.

3. Title Insurance

• Title insurance protects you against potential disputes over the property’s ownership.

• This one-time fee typically ranges from $300–$500.

4. Home Inspection Fees

• While optional, a home inspection is highly recommended to identify any issues with the property before closing.

• Costs vary between $400–$600, depending on the size of the property.

5. Mortgage Costs

• Appraisal Fees: Some lenders require a property appraisal, which costs around $300–$500.

• Mortgage Insurance: If your down payment is less than 20%, you’ll need to pay mortgage default insurance, commonly referred to as CMHC insurance.

6. Adjustments

• Buyers may need to reimburse sellers for pre-paid costs such as property taxes or utility bills that extend beyond the closing date.

Closing Costs for Ottawa Home Sellers

1. Real Estate Agent Commission

• The seller typically pays the commission for both their agent and the buyer’s agent.

• This fee is usually 4%–5% of the home’s sale price, split between the two agents.

2. Legal Fees

• Sellers also need a lawyer to review contracts, discharge the mortgage, and handle other legal details.

• Expect to pay around $1,500–$2,500.

3. Mortgage Discharge Fees

• If you’re paying off a mortgage early, your lender may charge a discharge fee or penalty.

• Penalties can vary but are often based on the remaining term of your mortgage and your interest rate.

4. Moving Costs

• While not technically a closing cost, moving expenses can add up.

• Budget for movers, packing supplies, and transportation costs.

5. Adjustments

• Sellers may need to reimburse buyers for unpaid property taxes or utility costs up to the closing date.

Tips for Managing Closing Costs

1. Get a Detailed Estimate
Before closing day, ask your lawyer and real estate agent for an itemized breakdown of your closing costs.

2. Save for Unexpected Expenses
It’s wise to set aside extra funds (approximately 1.5%–4% of the purchase price) to cover unexpected costs that may arise.

3. Take Advantage of Rebates
First-time buyers, in particular, should explore available rebates, such as the Land Transfer Tax rebate, to help reduce their costs.

4. Work with an Experienced Real Estate Agent
A knowledgeable agent can guide you through the process, ensuring you’re aware of all potential costs and helping you budget accordingly.

How Closing Costs Differ in Ottawa

Ottawa’s real estate market has unique considerations, such as the availability of city-specific programs and grants for first-time buyers. Additionally, the proximity to Quebec may influence certain legal and financial aspects if the property is near the border.

Whether you’re buying or selling a home in Ottawa, understanding your closing costs is essential for financial planning. By being prepared and working with the right professionals, you can ensure a smooth transaction without last-minute surprises.

If you’re considering buying or selling a home, New Purveyors is here to help. Contact us today for expert guidance on navigating Ottawa’s real estate market.