Buying a Home in Ontario: A Step-by-Step Closing Guide

Buying a home is exciting, but the period between signing the Agreement of Purchase and Sale and receiving the keys can feel complicated. During that time, financing must be finalized, title must be reviewed, closing funds must be arranged, and legal documents must be prepared and registered.

Understanding the closing process can help you avoid surprises and prepare for a smoother transaction.

1. Review the Agreement Before Signing

The Agreement of Purchase and Sale establishes the parties’ rights and obligations. Once accepted, it is generally a binding contract.

Important terms may include:

• The purchase price and deposit
• The closing date
• Financing and home-inspection conditions
• Items included with the property, such as appliances
• Fixtures or items excluded by the seller
• Representations and warranties
• The deadline for reviewing title
• The buyer’s right to revisit the property
• Special conditions affecting the transaction

Ideally, a lawyer should review the agreement before it becomes binding, particularly when purchasing a condominium, newly constructed home, rural property, tenanted property or home with unusual features.

A financing pre-approval should not necessarily be treated as final mortgage approval for a particular property. Buyers should confirm that their lender has approved both the borrower and the property before waiving a financing condition.

2. Retain a Real Estate Lawyer Early

After the agreement has been signed, provide your lawyer with a complete copy, including all schedules, amendments and waivers.

Your lawyer will ordinarily need information about:

• Your legal name and identification
• Your marital status
• How you intend to hold title
• Your mortgage lender and broker
• Your intended use of the property
• Your fire or property insurance
• Whether you may qualify for a land transfer tax refund
• The source of the money being used to complete the purchase

Buyers should retain a lawyer early enough to allow time to identify and address potential issues. Waiting until shortly before closing may limit the options available if a problem is discovered.

3. Complete the Necessary Due Diligence

The appropriate due diligence depends on the property and the terms of the agreement.

A lawyer’s title review may identify matters such as:

• Existing mortgages and liens
• Easements or rights of way
• Restrictive covenants
• Subdivision agreements
• Registered notices or restrictions
• The property’s legal description
• Rights affecting access to the property

The Law Society of Ontario advises lawyers to use a reasoned approach when determining the title and off-title searches appropriate for a transaction. The required searches may vary depending on whether the property is a condominium, rural property, rental property, waterfront property or multi-unit residence.

A lawyer’s title search is not a substitute for a home inspection. A qualified home inspector examines the property’s physical condition, while the lawyer focuses principally on title, legal documentation and closing.

Buyers planning to renovate, operate a business, rent part of the property or use it for another specific purpose should raise those plans early. Zoning, building compliance and other investigations may be required.

4. Review the Status Certificate for a Condominium

When purchasing a condominium, a status certificate and its supporting documents can provide important information about the condominium corporation.

The review may disclose:

• The condominium’s financial position
• The balance of its reserve fund
• The unit’s common expenses
• Arrears relating to the unit
• Existing or anticipated special assessments
• Insurance information
• Litigation involving the condominium corporation
• Rules affecting pets, parking, leasing or renovations

A status certificate review does not guarantee that common expenses will never increase or that a special assessment will not arise. It helps the buyer evaluate the information available at the time of the review.

5. Finalize Mortgage Financing

Your lender will send mortgage instructions to your lawyer. Those instructions explain the conditions that must be satisfied before the mortgage funds can be advanced.

The lender may require:

• Proof of property insurance
• Identification and income documentation
• Payment of outstanding debts
• Confirmation of the source of the down payment
• An appraisal
• Signed mortgage documents
• Additional title or insurance requirements

Buyers should avoid making significant financial changes before closing without consulting their mortgage professional. Taking on new debt, changing employment or moving money between accounts can affect financing or delay the lender’s review.

6. Decide How Title Will Be Held

If two or more people are buying together, they must decide how ownership will be registered.

Two common forms of ownership are:

Joint tenancy: When one joint tenant dies, that person’s interest will generally pass to the surviving joint tenant through the right of survivorship.

Tenancy in common: Each owner holds a distinct interest that can generally pass through the owner’s estate.

The appropriate choice depends on the buyers’ relationship, contributions, estate plans and other circumstances. Co-owners may also benefit from a separate co-ownership agreement addressing expenses, decision-making, occupancy and what happens if one person wants to sell.

7. Understand Title Insurance

Title insurance is commonly obtained in Ontario residential transactions. Depending on the policy and its exclusions, it may protect against certain losses involving:

• Title defects
• Existing liens
• Fraud or forgery
• Survey-related problems
• Some encroachments
• Certain municipal compliance issues
• Other risks described in the policy

Title insurance does not insure the home’s physical condition and does not cover every possible problem. Buyers should understand the policy’s coverage, exclusions and limits.

The Law Society of Ontario notes that title insurance can provide certain post-closing protections, including protection relating to some encroachment and fraud risks. However, its availability does not eliminate the need to consider appropriate due diligence.

8. Prepare for Closing Costs

The down payment is only one part of the money required to close a home purchase.

Depending on the transaction, closing costs may include:

• Ontario land transfer tax
• Toronto municipal land transfer tax, if applicable
• Legal fees and applicable taxes
• Title insurance
• Registration and search expenses
• Property-tax adjustments
• Condominium common-expense adjustments
• Mortgage-related charges
• HST or new-home adjustments, where applicable

Eligible first-time homebuyers may qualify for a refund of some or all of the Ontario land transfer tax, subject to the applicable requirements and maximum refund. A separate municipal land transfer tax may apply to property located in Toronto.

Your lawyer will prepare a statement showing the funds required to complete the transaction. Arrange for the closing funds well before the deadline and follow your law firm’s instructions carefully. Independently verify any request to send money because real estate transactions are frequent targets of wire-transfer fraud.

9. Arrange Property Insurance

If you are obtaining a mortgage, your lender will generally require suitable property insurance to be in effect by the closing date. The lender may need to be identified on the policy.

Do not leave this until closing day. Difficulty obtaining insurance—because of older wiring, previous claims, an oil tank or other property conditions—can affect the lender’s willingness to advance funds.

Condominium buyers may also require insurance for the individual unit, contents, improvements and personal liability, even though the condominium corporation maintains its own policy.

10. Complete the Final Walk-Through

If the agreement permits a pre-closing visit, use it to confirm that:

• The property remains in substantially the expected condition
• Agreed repairs have been completed
• Included appliances and other items remain at the property
• The property has not suffered significant damage
• The seller appears to have removed the agreed belongings

A final visit is not normally an opportunity to renegotiate the agreement or conduct a full new inspection. If you discover a serious problem, document it and contact your real estate agent and lawyer promptly.

11. Sign the Closing Documents

Before closing, you will meet with your lawyer or complete an approved remote-signing process.

Documents may include:

• The transfer
• Mortgage documents
• Land transfer tax statements
• Declarations required by the lender or government
• Title insurance documents
• Directions concerning ownership
• A statement of adjustments
• Documents confirming the receipt and use of funds

Ask questions about anything you do not understand before signing.

Your lawyer will also verify your identity and may ask additional questions about the transaction and the source of funds. These procedures form part of the safeguards used to prevent fraud and money laundering.

12. What Happens on Closing Day?

On closing day, the buyer’s lawyer and seller’s lawyer exchange documents and funds electronically.

The buyer’s lawyer will generally:

1. Receive mortgage funds from the lender.
2. Combine those funds with the buyer’s closing funds.
3. Complete the required legal and financial arrangements.
4. Register the transfer and mortgage.
5. Release the purchase funds in accordance with the closing process.
6. Confirm that the transaction has closed.

The keys or access instructions are released after closing has been confirmed. This may occur later in the afternoon, so buyers should avoid scheduling movers too early or assuming they will have access first thing in the morning.

Special Considerations for Newly Built Homes

Purchasing from a builder can involve different agreements, adjustments, occupancy arrangements and HST considerations.

Before closing, a new-home buyer may also participate in a pre-delivery inspection. Tarion describes the inspection as an important part of the new-home process. Buyers should carefully record incomplete, damaged or missing items and understand the applicable warranty reporting deadlines.

Builder agreements are often lengthy and may contain additional closing charges. Legal review before signing is particularly valuable.

What Happens After Closing?

After registration, your lawyer will report to you and provide the relevant closing documents. Depending on the transaction, this package may include:

• Confirmation of registered ownership
• Mortgage information
• The statement of adjustments
• The trust ledger or financial statement
• The title insurance policy
• Copies of signed closing documents

Keep these documents with your important records. Contact your lawyer if a title, ownership or closing issue emerges after completion.

A Smoother Ontario Home Purchase Begins With Early Preparation

Every home purchase is different. A condominium, newly built house, rural property, investment property or purchase involving several family members may require additional investigation and planning.

Obtaining advice early allows your lawyer to understand the property, review the transaction and identify legal issues while there may still be time to address them.

DJC Law Professional Corporation assists Ontario homebuyers with residential real estate purchases and closings. Contact our office to discuss your proposed transaction and the legal services appropriate for your purchase.