Start with the basics

Deposit, down payment and closing costs are three different things

The deposit amount and timing are agreement-specific. Make sure the funds will actually be available when the offer requires them. RECO notes that failing to deliver a required deposit does not simply cancel the transaction.

Ontario land transfer tax

Land transfer tax is one of the larger closing costs

Hamilton and Ancaster buyers pay Ontario land transfer tax when ownership transfers.

Using the current Ontario formula, the provincial tax works out to:

If you are comparing Hamilton with Toronto, remember that Toronto also has its own municipal land transfer tax. That separate Toronto tax does not apply to a Hamilton or Ancaster purchase.

First-time buyers

A qualifying first-time buyer may reduce the tax by up to $4,000

Ontario currently provides an eligible first-time homebuyer with a land transfer tax refund of up to $4,000.

That does not mean everyone buying their first home automatically qualifies. Ontario has eligibility rules dealing with previous ownership, age, spouses and occupancy.

Your lawyer should confirm eligibility before you build that refund into the money you expect to need at closing.

If you are still sorting out the broader programs available to qualifying buyers, see my Hamilton First-Time Buyer Programs guide.

Minimum down payment

What does a $750,000 insured purchase require?

For an eligible insured purchase below $1.5 million, current CMHC minimum-down-payment rules require:

• 5% of the first $500,000
• 10% of the portion above $500,000

On a $750,000 purchase:

Mortgage insurance

A smaller down payment can create another cash expense

If you buy with less than 20% down, mortgage loan insurance will generally be required on an eligible insured purchase.

The mortgage insurance premium itself can usually be added to the mortgage rather than paid entirely in cash.

Ontario applies an 8% Retail Sales Tax to taxable insurance premiums. CMHC confirms that provincial sales tax on the mortgage insurance premium cannot be added to the mortgage amount.

Other costs

Legal costs, adjustments and property-specific expenses vary

There is no universal lawyer fee or one all-inclusive closing-cost number that works for every purchase.

Depending on the property and financing, you may need to budget for:

• lawyer fees and disbursements;
• registration and title-related costs;
• property-tax or utility adjustments;
• property insurance;
• home inspection costs;
• lender appraisal costs where applicable;
• condominium document or status-certificate costs where applicable;
• Ontario tax on the mortgage-insurance premium where applicable.

Get the actual legal estimate from your lawyer and the financing numbers from your lender or mortgage professional. Those quotes are more useful than assuming every purchase costs the same amount to close.

After closing

Do not budget only to the day you get the keys

Not every expense will appear on your lawyer's closing statement.

You may still need money for moving, utility setup, furniture, immediate maintenance or repairs after possession.

I would rather see a buyer purchase slightly below the maximum approval and still have cash available after closing than use every available dollar simply because the lender approved the purchase.

That reserve is not technically a closing cost. It is still part of deciding whether the purchase is comfortable.

Practical worksheet

Build the cash-to-close number without counting the deposit twice

$750,000 example

What does the starting math look like?

For an otherwise eligible insured $750,000 purchase using the current minimum-down-payment rules:

And remember: if some of that $50,000 down payment has already been paid as the deposit, do not add the deposit again when you calculate the remaining funds needed at closing.

Before you shop at the maximum

Confirm the cash requirement early

A mortgage approval tells you something important. It does not automatically tell you how much cash the transaction requires or how comfortable your finances will be after closing.

Before shopping near the top of your approval, I would confirm:

• the down payment and financing with your lender or mortgage professional;
• the expected land transfer tax and legal closing costs with your lawyer;
• the deposit amount and timing before submitting an offer;
• enough remaining cash for the move and the first few months of ownership.

If you are still working through the full purchase process, start with my Hamilton First-Time Home Buyer Guide. If you are checking rebates and programs, use the Hamilton First-Time Buyer Programs page. If you are actively looking at properties, my Hamilton Buyer Agent page explains how I help buyers evaluate the property and the offer itself.

Common questions

Hamilton buyer closing-cost FAQ