The down payment is not the total cash required
A buyer may need funds for the deposit and remaining down payment, land transfer taxes, legal fees and disbursements, title insurance, property adjustments, mortgage-insurance tax where applicable, inspection, appraisal, lender or brokerage fees where applicable, moving, repairs and reserves.
Deposit and remaining down payment
The deposit is paid under the purchase agreement and is credited toward the buyer’s total contribution.
Example:
Purchase price: $900,000
Total down payment: $180,000
Deposit paid: $50,000
Remaining down payment at closing: $130,000
Ontario and Toronto land transfer taxes
Ontario land transfer tax generally applies to the acquisition of land or a beneficial interest and is usually payable when the transfer is registered.
A purchase within the City of Toronto may also attract Toronto Municipal Land Transfer Tax. Ontario and Toronto first-time-buyer refunds have separate eligibility requirements.
Transfers involving spouses, corporations, trusts, estates or beneficial owners should be reviewed legally and, where appropriate, for tax consequences.
Legal, title and property costs
Legal costs may include the lawyer’s professional fee, title search, registration, execution searches, disbursements, title insurance, mortgage discharge and HST.
Private and commercial files may require separate lender counsel, with the borrower paying both legal accounts under the commitment.
Title insurance may cover specified title risks but does not replace home insurance, inspection, environmental review or legal advice.
Appraisal and inspection costs depend on property type, location, scope and urgency.
Mortgage and financing costs
Where default insurance is required, the premium may ordinarily be added to the mortgage, subject to program rules. Applicable provincial tax on the premium generally requires cash at closing.
Alternative, private, commercial, bridge and construction financing may involve lender fees, brokerage fees, lender legal fees, prepaid interest and appraisal costs.
The approved mortgage amount is not necessarily the amount the borrower receives after fees and payouts.
Adjustments and builder costs
Adjustments can allocate property taxes, condominium fees, rent, utilities or fuel between buyer and seller.
New construction may involve development charges, utility connections, warranty-related charges, occupancy fees, HST adjustments, reserve contributions and builder-specific closing adjustments.
Worked purchase example
Purchase price: $900,000
Down payment: $180,000
Deposit paid: $50,000
Mortgage: $720,000
Illustrative Ontario land transfer tax: $14,475
Legal fee and disbursements: $2,500
Title insurance: $500
Appraisal: $500
Inspection: $600
Tax adjustment: $1,800
Moving and setup: $3,500
Repair reserve: $5,000
Remaining down payment = $130,000
Other planned funds = $28,875
Additional cash required after deposit = $158,875
Total buyer cash including deposit = $208,875
The total cash requirement is $28,875 greater than the down payment under the stated assumptions.
Actual land transfer tax, legal costs and adjustments must be calculated for the real transaction and closing date.
Worked refinance proceeds
New mortgage: $600,000
Existing first-mortgage payout: $475,000
Penalty: $9,000
HELOC payout: $50,000
Legal and discharge costs: $2,500
Appraisal: $500
Lender and brokerage fees: $12,000
Net available = $51,000
Although the new mortgage is $125,000 larger than the existing first mortgage, only $51,000 remains after all other payouts and costs.
Land transfer tax is excluded; Toronto MLTT is missed; a first-time-buyer rebate is assumed incorrectly; builder adjustments are underestimated; a shortfall appears; mortgage-insurance tax is omitted; private fees are deducted from proceeds; both lawyers’ costs are not budgeted; the existing penalty changes; or a gift covers the down payment but not closing costs.
If You Remember Only Three Things
1. The down payment is only one component of the cash required to close.
2. Ontario and Toronto land-transfer taxes must be treated separately.
3. Net mortgage proceeds may be far lower than the approved amount after fees, penalties and payouts.