Cottage closing costs in Ontario

Closing costs are the one-time expenses you pay to complete a purchase, on top of the down payment. On a cottage they tend to run higher than on a city house, because there are more inspections and the legal work is more involved. Most of these costs must be paid in cash. They cannot be added to the mortgage.

Typical cost items

Cost	Paid to	Notes
Ontario land transfer tax	Province of Ontario, through your lawyer	Usually the largest closing cost. See the brackets below.
Legal fees and disbursements	Your real estate lawyer	Covers title search, registration and closing. Waterfront and private-road files can take more work. HST applies to legal fees.
Title insurance	Title insurer, through your lawyer	A one-time premium. Most lenders require it.
Home inspection	Home inspector	Paid at the time of inspection, before closing.
Septic inspection and pump-out	Septic inspector and pumping company	Agree in the offer on who pays for the pump-out.
Water testing	Public health lab or a private lab	Public Health Ontario tests private drinking water for bacteria at no charge. Chemical and mineral tests are done by private labs for a fee.
WETT inspection	WETT-certified inspector	For wood stoves and fireplaces. Insurers often ask for it.
Appraisal	Appraiser, or your lender	Required by some lenders, more often on rural and waterfront property.
Survey, if needed	Ontario land surveyor	Only if no usable survey exists and you or your lender want one.
Mortgage default insurance	CMHC, Sagen or Canada Guaranty, through your lender	Applies with less than 20% down. The premium is added to the mortgage. Ontario charges sales tax on the premium, and that tax is paid in cash at closing.
Adjustments	The seller	Your share of items the seller prepaid, such as property tax, road association fees or fuel left in the tank.
Property insurance	Your insurer	Must be in place on the closing date. The lender will ask for proof.
Non-Resident Speculation Tax	Province of Ontario	25% of the price. Applies only to foreign nationals, foreign corporations and taxable trustees. It applies province-wide.

Fees for lawyers, inspectors and surveyors vary by firm and by area. Ask for written quotes early, and ask your lawyer for an estimate of the total cash you will need on closing day.

Ontario land transfer tax

Land transfer tax is charged on the purchase price when the property is registered in your name. It is a marginal tax, like income tax. Each slice of the price is taxed at its own rate.

Portion of the purchase price	Rate
Up to and including $55,000	0.5%
Over $55,000, up to and including $250,000	1.0%
Over $250,000, up to and including $400,000	1.5%
Over $400,000	2.0%
Over $2,000,000, where the land has one or two single family residences	2.5%

These are the rates published by the Ontario government and have applied since 2017.

A worked example

Take a cottage that sells for $800,000.

• First $55,000 at 0.5% = $275
• Next $195,000 at 1.0% = $1,950
• Next $150,000 at 1.5% = $2,250
• Remaining $400,000 at 2.0% = $8,000

The total is $12,475. You can run your own price in our calculators.

No municipal land transfer tax in cottage country

The City of Toronto charges its own municipal land transfer tax on top of the provincial one. No other Ontario municipality does. A buyer in Muskoka, Haliburton, the Kawarthas or anywhere else outside Toronto pays the provincial tax only.

The first-time buyer refund rarely applies

Ontario refunds up to $4,000 of land transfer tax to eligible first-time homebuyers. To qualify, you must never have owned a home anywhere in the world, and you must occupy the property as your principal residence within nine months. A cottage bought as a second property will not qualify. A first-time buyer who moves to the cottage to live there full-time may.

What about HST

A used residential cottage bought from an individual who used it personally is generally exempt from HST. HST can apply in some cases, including a newly built cottage bought from a builder, some sales of vacant land, and a property that was operated mainly as a short-term rental business. If HST applies, the agreement should say plainly if it is included in the price or added to it. Have your lawyer confirm this before you sign.

Costs after closing

These are not closing costs, but they arrive in the first few weeks, so plan for them.

• Utility deposits and account set-up for hydro, propane and internet
• New locks, smoke alarms and carbon monoxide alarms
• Road association and lake association fees
• Any repairs you agreed to take on after the inspections

How to keep the total in check

1. Ask the seller for an existing survey, septic permit, pump-out receipt and WETT report. Each one can save you a fee or shorten an inspection.
2. Get legal and inspection quotes before you offer.
3. Keep a cash cushion beyond your estimate. Rural files turn up surprises more often than city ones.
4. Confirm your financing early, since the type of cottage changes the down payment. See how to finance a cottage in Ontario.

For the full purchase process, read the Ontario Cottage Buyers Guide.

This is general information, not legal or tax advice. Your lawyer will give you the exact figures for your purchase.