Short answer
Ontario land transfer tax is calculated using graduated rates on the value of consideration. Your lawyer normally collects it at closing, and it is generally cash required in addition to the down payment.
The closing problem buyers face
A buyer qualifies for the mortgage and has the minimum down payment, then discovers that land transfer tax, legal fees and adjustments require thousands more before the lawyer can close.
What the official rule says
Ontario applies marginal land-transfer-tax rates to successive portions of the consideration. A higher rate also applies to the portion above $2 million for land containing one or two single-family residences.
What this does not guarantee
Online estimates can miss Toronto municipal tax, first-time-buyer eligibility, NRST, related-party transfers or non-cash consideration. A mortgage approval does not mean the lender will add these costs to the loan.
A practical Ontario example
Illustration only: A buyer budgeting exactly 5% down cannot assume the mortgage covers land transfer tax. Even when a refund is available, other closing costs and reserves still need verified funds.
What to do before the offer becomes firm
Ask the real-estate lawyer for an early written estimate based on price, municipality, ownership and residency. Show the broker the remaining liquid funds before making the offer firm.
- Which municipality and property type are involved?
- Who will be on title, and what are their citizenship, residency and ownership histories?
- Is the property resale, new, substantially renovated, rental, mixed-use or held by a business?
- Which taxes, rebates and adjustments has the lawyer confirmed in writing?
- How much verified cash remains after the deposit and every closing cost?
Rajiv’s broker perspective
A lender decides the mortgage amount under its credit, income, property and loan-to-value policies. The province, municipality, CRA and lawyer determine the applicable taxes and legal closing funds. Those are different decisions. I would calculate the full cash-to-close first, preserve a contingency and only then compare A-lender, alternative/B, MIC or private options if the complete borrower and property facts require another financing path. Borrowing a tax shortfall at the last minute can change debt ratios and approval.
Related: First-Time Buyer Rule Hub · Real Estate Centre · Updates & Rules Centre
Could closing costs change the mortgage plan?
Send Rajiv the price, municipality, property type, deposit, title holders and available closing cash. He can pressure-test the funds-to-close and identify the tax or legal questions that should be confirmed before you commit.