I’ve saved the down payment. Why do I need more cash at closing?
Answered by Rajiv Verma, Mortgage Broker · Updated August 2026 · About a 5 minute read
The direct answer
The down payment gets you into the deal. Closing costs get you across the line. On top of the down payment your lawyer needs land transfer tax, legal fees and disbursements, title insurance, and adjustments for anything the seller has prepaid. In Toronto there are two land transfer taxes, not one. None of it can be added to the mortgage. It has to be cash, in the lawyer’s trust account, before closing.
THE SHORT VERSION
- Land transfer tax is usually the largest item — and Toronto charges a second, municipal one
- Legal fees, disbursements and title insurance sit on top
- Adjustments reimburse the seller for taxes or fees they’ve paid past the closing date
- First-time buyer rebates exist — up to $4,000 provincially, up to $4,475 more in Toronto
- The rebate often arrives as a credit at closing, but don’t assume it — ask your lawyer
Land transfer tax — the one that surprises people
Ontario charges land transfer tax on every residential purchase. Buy inside the City of Toronto and you pay it twice — once to the province and again to the city, at broadly similar rates.
That is why a Toronto condo and a Brampton townhouse at the same price do not cost the same to close. Brampton, Mississauga, Vaughan and Caledon buyers pay the provincial tax only.
The part nobody tells you.
First-time buyer rebates are not automatic in the way people assume. Ontario refunds up to $4,000, which means no provincial land transfer tax at all on the first $368,000 of value. Toronto refunds up to a further $4,475 on the municipal tax.
The catch is the definition. You cannot have owned a home, or any interest in one, anywhere in the world, at any time. Not “not recently” — ever. And if you are married, your spouse cannot have owned one during the marriage either, which disqualifies plenty of couples who assumed only the applicant mattered.
It also has to be your principal residence within nine months, and the claim has an eighteen-month deadline.
What else the lawyer needs
Legal fees and disbursements. Your lawyer’s own fee, plus the cost of searches, registration and courier. Get the figure quoted as an all-in number, not a headline fee.
Title insurance. A one-off premium, almost always required by the lender.
Adjustments. If the seller paid property tax to the end of the year and you close in June, you reimburse them for the balance. The same applies to condo fees and sometimes utilities. This number is not knowable precisely until close to the date, which is why lawyers ask for a cushion.
Interest adjustment. A few days of interest between funding and your first regular payment date.
The appraisal, where one is required and not covered by the lender — who pays for it, and who owns it.
New builds are different again
If you are buying from a builder there can be development and levy charges, occupancy costs during an interim period, and utility connection or meter fees. Those are not standard resale items and they can be substantial. The new-build page covers what to look for.
The rule I give every first-time buyer
Do not put every dollar you have into the down payment.
A slightly smaller down payment with a proper closing cushion is a stronger position than a maximum down payment and an empty account on closing day. Lawyers cannot close without the funds, and a deal that fails at the finish line is a catastrophe rather than an inconvenience.
What to check
- Whether the property is inside the City of Toronto — it changes the tax materially
- Whether you and your spouse both genuinely qualify as first-time buyers
- Your lawyer’s all-in quote, fees and disbursements together
- Whether the rebate will be credited at closing or claimed afterwards
- Whether the purchase is a new build, with its own set of charges
What to do next
Build the closing costs into your budget before you make an offer, not after. Send me the price range and the city and I’ll tell you what to set aside — and where a rebate does or doesn’t apply to you.
Related questions
- What legal costs are involved, and do I need my own lawyer?
- The builder deposit is paid. What else do I need before closing?
- My parents are giving me the down payment. Will the lender have a problem?
Answered by Rajiv Verma, Mortgage Broker · Mortgage Architects — FSRA Brokerage Licence #12728 · Licensed in Ontario · Office 289.505.0631 · Direct 647.291.7116
General educational information only and not legal or tax advice. Land transfer tax, rebate amounts and eligibility rules are set by the Province of Ontario and the City of Toronto and can change — rates and rebate maximums stated as at August 2026. Your lawyer calculates the actual figures for your transaction.