Closing Costs When Selling a House in Ontario
Selling your home involves more than just finding a buyer. From real estate commission and legal fees to mortgage penalties and tax considerations, understanding every cost upfront helps you plan your finances and avoid surprises at closing. Here is a complete breakdown of what Ontario sellers can expect to pay.
Complete Cost Breakdown
Here is every cost you should budget for when selling your home in Ontario, from the largest to the smallest:
Worked Example: Selling a $900,000 Home
Here is what closing costs look like for a typical home sale in Mississauga, assuming a $900,000 sale price, 5% total commission, and a fixed mortgage with a moderate penalty:
This is a simplified example for illustration. Your actual costs will vary based on your specific situation. Capital gains tax is not included (assuming principal residence).
The Biggest Costs Explained
Real Estate Commission
The largest single closing cost for sellers. Commission is negotiable and typically ranges from 4% to 5% of the sale price, split between the listing agent's brokerage and the buyer's agent's brokerage. HST (13%) is charged on top of the commission. On a $900,000 sale at 5%, this equals $45,000 + $5,850 HST = $50,850.
Read more: How Much Are Realtor Fees in Ontario?
Mortgage Prepayment Penalty
If you sell before your mortgage term ends, your lender may charge a prepayment penalty. This can be one of the most surprising and significant costs:
Variable Rate Mortgage
Penalty is typically 3 months of interest.
Fixed Rate Mortgage
Penalty is the greater of 3 months' interest or the IRD.
Always contact your lender for an exact penalty quote before listing. The IRD calculation varies between lenders and can be substantially higher than expected.
Capital Gains Tax
If the property you are selling is not your principal residence, you will owe capital gains tax on the profit:
- Principal residence: Exempt from capital gains tax
- Investment property: 50% inclusion rate on first $250,000 of gains
- Above $250,000: 66.67% inclusion rate (as of June 2024)
- Selling expenses can be deducted from the capital gain
Tax rules are complex and change frequently. Always consult a tax professional for advice specific to your situation.
Estimated Closing Costs by Sale Price
Here is what total closing costs look like at different price points, assuming 5% commission, standard legal fees, and moderate additional costs:
"Other costs" includes legal fees, mortgage discharge/penalty, staging, repairs, cleaning, and moving. Capital gains tax not included (assumes principal residence). Use our Seller Costs Calculator for a personalised estimate.
Tips to Reduce Your Closing Costs
Before Listing
- Get an exact mortgage penalty quote from your lender
- If possible, time your sale near your mortgage renewal date
- Ask your agent about which repairs offer the best return
- Compare lawyer fees — get quotes from at least 2-3 firms
- Consider partial staging (key rooms only) to reduce costs
Smart Strategies
- Focus on net proceeds, not just commission rate
- A great agent's negotiation can offset commission cost
- Port your mortgage to your next home to avoid penalties
- Consult a tax professional about capital gains planning
- Keep receipts for all selling-related expenses
Frequently Asked Questions
How much are closing costs when selling a house in Ontario?
Closing costs for sellers in Ontario typically range from 4% to 7% of the sale price. The largest expense is the real estate commission (4-5% of the sale price plus 13% HST), followed by legal fees ($1,500-$2,500+), potential mortgage discharge penalties, and miscellaneous costs like staging, moving, and repairs. On a $900,000 home, total closing costs could range from $36,000 to $63,000, with the majority being the agent's commission.
Do sellers pay closing costs in Ontario?
Yes. In Ontario, sellers are responsible for several closing costs including real estate commission (the largest expense), legal fees for the seller's lawyer to handle the transaction, mortgage discharge fees, any outstanding property taxes or utility adjustments, potential mortgage prepayment penalties, and capital gains tax if the property is not your principal residence. The buyer pays their own separate closing costs (land transfer tax, their lawyer, etc.).
Do I have to pay capital gains tax when I sell my house?
If the property is your principal residence, you are generally exempt from capital gains tax under the Principal Residence Exemption in Canada. However, if the property is an investment property, rental property, cottage, or second home, you will owe capital gains tax on the profit. Currently, 50% of the capital gain is added to your income and taxed at your marginal tax rate. The rules changed in June 2024 — for capital gains above $250,000, the inclusion rate increased to 66.67% for individuals. Always consult a tax professional for your specific situation.
What is a mortgage prepayment penalty?
A mortgage prepayment penalty is a fee charged by your lender when you pay off your mortgage before the end of its term — which happens when you sell your home. For variable-rate mortgages, the penalty is typically 3 months of interest. For fixed-rate mortgages, the penalty is the greater of 3 months' interest or the Interest Rate Differential (IRD), which can be significantly higher — sometimes $10,000 to $30,000+ depending on the remaining term and rate difference. Contact your lender for an exact penalty quote before listing your home.
Can I deduct selling costs from capital gains?
Yes, if you are subject to capital gains tax (i.e., the property is not your principal residence), you can deduct certain selling expenses from your capital gain, reducing your tax liability. Deductible expenses typically include real estate commission, legal fees, staging costs, and certain repair costs made specifically to prepare the home for sale. Keep all receipts and consult your accountant to ensure you claim all eligible deductions.
What is the difference between closing costs for buyers and sellers?
Buyers and sellers have different closing costs. Sellers pay real estate commission, their lawyer's fees, mortgage discharge and penalties, and any property adjustments. Buyers pay land transfer tax (Ontario and municipal if applicable), their lawyer's fees, title insurance, home inspection, mortgage insurance (if applicable), and property adjustments. The biggest difference is that sellers pay the real estate commission (4-5% of sale price) while buyers pay land transfer tax (which can also be substantial in Ontario).
For more information on commission rates, see our Average Realtor Commission in Canada and Realtor Fees in Ontario guides.
Get Your Personalised Net Proceeds Estimate
Joe Battaglia provides every seller with a detailed net proceeds estimate before listing, so you know exactly what to expect. With over 25 years of experience and 1,000+ successful transactions, the Battaglia Team helps you maximise your sale price and minimise unnecessary costs.