Closing costs for sellers in Ontario come down to five things: the real estate commission plus HST, your mortgage payout and any prepayment penalty, your lawyer’s fee plus HST, a short list of disbursements, and the adjustments that settle property tax and other prepaid costs with the buyer. Sellers pay no land transfer tax, no title insurance and no title search. The commission and the mortgage penalty are usually the two largest numbers.
Most cost guides are written for buyers. This one is for the other side of the table: what comes off your sale price, who takes it, and what actually lands in your account on closing day.
Closing Costs for Sellers at a Glance
| Cost | Who receives it | How it is set |
|---|---|---|
| Real estate commission | Listing brokerage, which shares it with the buyer’s brokerage | Negotiated in your listing agreement |
| HST on the commission | Government, through the brokerage | 13% of the commission |
| Mortgage payout | Your lender | The balance on your payout statement |
| Prepayment penalty | Your lender | Your mortgage contract |
| Lender discharge or administration fee | Your lender | Your lender’s fee schedule |
| Legal fee plus HST | Your lawyer | Quoted before you retain the firm |
| Disbursements | Government, Law Society and third parties | Usually $200 to $400 for a sale |
| Adjustments | The buyer, or you | Calculated to the closing date |
Two costs buyers worry about do not apply to you. Land transfer tax is paid by the buyer, provincially and, in Toronto, municipally. Title insurance is also a buyer’s cost. The sale of a used home is generally exempt from HST, so no HST is charged on your sale price, only on the services you pay for.
Real Estate Commission and HST
Commission is the largest closing cost for most sellers. There is no standard rate in Ontario. It is negotiated with your listing brokerage and written into the listing agreement, often as a percentage of the sale price, and part of it is usually offered to the brokerage that brings the buyer. Read that clause before you sign, because it decides what comes off the top of every offer you receive.
The listing agreement is also a contract for a set period. It states how long you are committed to that brokerage. If you move to another agent before it ends, the brokerage you signed with may be able to claim its commission, so you could end up owing commission twice. Check the length of the agreement before you sign, and speak to a lawyer if you want to end it early.
HST at 13% is added to the commission. On a sale where the commission comes to $40,000, the HST alone is $5,200.
The commission is usually paid out of the buyer’s deposit, which the listing brokerage holds in trust. On closing, the brokerage keeps what it is owed from the deposit and sends any balance to your lawyer. If the deposit does not cover the full commission, your lawyer pays the difference from the sale proceeds.
Mortgage Discharge and Prepayment Penalties
If you have a mortgage, it has to be paid out on closing so the buyer receives clear title. Your lawyer orders a payout statement from your lender, pays the full amount from the sale proceeds on closing day, and then obtains and registers the discharge. Registering the discharge costs $86.42, which appears in your disbursements.
The mortgage itself can carry two charges that surprise sellers.
- A prepayment penalty. Paying off a closed mortgage before the end of its term usually costs a penalty. The Financial Consumer Agency of Canada explains that it is usually the higher of three months’ interest or the interest rate differential. On a fixed-rate mortgage the interest rate differential can be several times larger than three months’ interest. Variable-rate mortgages are typically limited to three months’ interest.
- A discharge or administration fee. Many lenders charge their own fee to process the discharge. It is a lender charge, not a legal one, and it comes off your proceeds either way.
Ask your lender for a penalty estimate before you list, not after you accept an offer. If you are buying another home, ask whether you can port the mortgage to the new property, which can avoid the penalty altogether. Your mortgage contract sets out exactly how the penalty is calculated.
Legal Fees and Disbursements for a Sale
Legal fees are one of the smaller closing costs for sellers, because a sale costs less in legal work than a purchase. There is no title search to order, no title insurance policy to place and no new mortgage to register. Your lawyer still carries real responsibility, and you pay a legal fee plus HST for it.
Disbursements on a sale are short. They cover registering the mortgage discharge at $86.42, the $65 Law Society transaction levy, conveyancing software, identity verification, couriers and the bank charges on the mortgage payout. Most sellers pay between $200 and $400. Our guide to real estate lawyer disbursements in Ontario lists every item and who receives it, and our guide to real estate lawyer fees in Ontario explains how legal fees are set.
We quote residential sales as a flat legal fee, with every disbursement itemized. Our instant quote shows the full figure for your sale before you instruct us.
Adjustments on Closing
Adjustments are not fees. They settle costs between you and the buyer so each side pays for the days they own the property.
- Property tax. If you have paid taxes past the closing date, the buyer reimburses you. If you are behind, you credit the buyer, or the arrears are paid from your proceeds.
- Condominium common expenses. If you have paid the month’s fees, the buyer reimburses the days after closing.
- Prepaid items the buyer takes over. This can include fuel oil left in the tank or a rental equipment contract the buyer assumes, if your agreement says so.
Your lawyer prepares the statement of adjustments, and the buyer’s lawyer checks it. It usually moves the final figure by a few hundred dollars in either direction, but on a sale with tax arrears or a large prepayment the amount can be larger.
Worked Example: What a Toronto Seller Takes Home
Here is how closing costs for sellers add up in practice. This illustration uses assumed figures for a Toronto home selling for $1,100,000. The seller has a fixed-rate mortgage with $520,000 outstanding at 4.6% and two years left on the term, the listing agreement sets total commission at 4% for this example, and the seller has prepaid property tax past the closing date.
| Item | Amount |
|---|---|
| Sale price | $1,100,000 |
| Commission at 4% (assumed) | −$44,000 |
| HST on commission at 13% | −$5,720 |
| Mortgage payout | −$520,000 |
| Prepayment penalty, three months’ interest at 4.6% | −$5,980 |
| Disbursements (within the usual $200 to $400) | −$350 |
| Property tax adjustment, credit from the buyer (assumed) | +$1,200 |
| Net proceeds before legal fee | $525,150 |
From that figure, subtract your legal fee plus HST, which our instant quote shows for your sale price, and any discharge fee your lender charges. Two points matter more than any other line.
- The penalty could be much larger. We used three months’ interest. If your lender applies the interest rate differential instead, the penalty on a fixed-rate mortgage can be several times higher. Only your lender’s payout statement gives the real number.
- Commission is the line most worth negotiating. On a $1,100,000 sale, each 1% of commission costs $11,000, plus $1,430 in HST. Agree the rate before you sign the listing agreement.
What Your Lawyer Does on a Sale
Your lawyer acts for you from the accepted offer to the release of your proceeds: reviewing the agreement and its deadlines, answering the buyer’s lawyer, paying out your mortgage and sending you the net proceeds. Our page on hiring a lawyer for selling a house in Toronto walks through each step and shows the legal fee for your sale.
Bring your lawyer in as soon as you accept an offer, and ideally before, if your listing agreement or the offer has unusual terms. A missed condition date or a forgotten discharge from a previous mortgage is far easier to deal with in week one than on closing day.
Tax Points for Sellers
If the home was your principal residence for every year you owned it, the gain is usually sheltered from capital gains tax. You still have to report the sale and the principal residence designation on your tax return for the year of the sale, as the Canada Revenue Agency requires. A rental property, a cottage or a home you did not live in for part of the time is different, so speak to your accountant before you list.
Sellers who are not residents of Canada face an extra step under section 116 of the Income Tax Act. Unless the seller obtains a clearance certificate from the Canada Revenue Agency, the buyer’s lawyer will hold back part of the sale price, so non-resident sellers should start that process early.
Common Questions
What Are Closing Costs for Sellers in Ontario?
Sellers pay the real estate commission plus HST, the mortgage payout with any prepayment penalty and lender discharge fee, their legal fee plus HST, disbursements of usually $200 to $400, and any adjustments owed to the buyer. Sellers do not pay land transfer tax or title insurance.
Do Sellers Pay Land Transfer Tax in Ontario?
No. Land transfer tax, including Toronto’s municipal land transfer tax, is paid by the buyer.
Do I Have to Pay a Penalty to Break My Mortgage When I Sell?
Usually yes, if you pay off a closed mortgage before the end of its term. The penalty is usually the higher of three months’ interest or the interest rate differential, and on fixed-rate mortgages the interest rate differential can be much higher. Porting the mortgage to a new home can avoid it, so ask your lender before you list.
Is HST Charged When I Sell My Home?
Not on the sale price of a used home, which is generally exempt. HST at 13% is charged on the real estate commission and on your legal fee.
Do I Need a Lawyer to Sell My House in Ontario?
In practice, yes. Ontario’s electronic land registration requires a lawyer to sign the transfer for the seller. Our selling a home page explains what the lawyer handles.
Know Your Number Before You List
Most sellers know their asking price to the dollar and their closing costs only roughly. Ten minutes with your mortgage contract, your listing agreement and a legal quote turns that into a real figure, and it often changes what you are willing to accept.
Wannes Law acts for sellers across Toronto, the GTA and Ontario. Read more about how we handle selling a home, or get an instant quote for your sale and see the full legal cost before you commit.
This article provides general information about Ontario law and does not constitute legal advice. The worked example uses assumed figures for illustration only. Commission, mortgage penalties and tax outcomes depend on your own agreements and circumstances. Speak to a lawyer, your lender and your accountant before relying on any figure.
Sources: Mortgage fees: Prepayment penalties, Financial Consumer Agency of Canada · Reporting the sale of your principal residence, Canada Revenue Agency · IC72-17R6, Section 116, Canada Revenue Agency
