Estimating Net Proceeds When Selling Your Ontario Home

What net proceeds from selling a home in Ontario means

Net proceeds are the money you keep. Start with the price on the agreement of purchase and sale, subtract everything that must be paid out of it, and the remainder is what you can put toward your next home, your retirement income or your children. It is a different number from the equity you think you have, because equity is usually figured from an appraisal or an online estimate, and the sale price may differ from both.

Downsizers feel this gap more than most. A buyer's purchase of a smaller home often depends on the money from the larger one, and a shortfall of a few thousand dollars can change which homes are realistic. That is why it pays to build the estimate early and revise it as quotes arrive.

All dollar figures on this site are Canadian. Nothing here is tax, legal or financial advice. Your Ontario real estate lawyer and your lender have the actual numbers for your file. If you want a quick starting point, use the net proceeds calculator and then check each line against the sections below.

The main lines that come off an Ontario sale price

Most Ontario sales have the same handful of deductions. In rough order of size for a typical owner:

• The mortgage payout, plus any prepayment penalty or discharge charges.
• The real estate commission, with tax added.
• Your lawyer's fees and disbursements.
• Closing adjustments, such as property tax and utilities.
• Preparation costs, such as repairs, cleaning, staging and storage.
• Moving costs and any overlap between homes.

Some owners also have a line of credit, a second mortgage or a lien on title, and those must be paid out of the proceeds too. If you are selling for an estate rather than for yourself, the order and the paperwork differ, and the guide to helping a parent sell their home covers that situation.

Real estate commission and HST on a sale

The commission is the largest deduction for an owner with no mortgage. It is set in the listing agreement you sign with your brokerage, and it is agreed between you and the brokerage. Because remuneration is a negotiated term, ask what it covers: whether any portion goes to the buyer's brokerage, and what happens if the home does not sell during the listing period.

Tax matters here. The Canada Revenue Agency says registered real estate agents must charge GST/HST on their commission, including on the sale of real property (CRA, GST/HST special cases). So the percentage in the contract is not the final cost. Ask your agent for a dollar figure at a few sample sale prices, with the tax included, so you are comparing the real amount rather than the headline rate.

RECO, the regulator, requires that remuneration terms that could affect whether an offer is accepted be disclosed to anyone making a written offer. In practice, that means the commission arrangement is something your agent should be able to explain plainly. If a figure in the paperwork surprises you, ask before you sign, not at closing.

Messages on this site go to real estate agents on the operating team at eXp Realty. Commission is always agreed with the brokerage directly.

Legal fees and disbursements on an Ontario sale

You need a lawyer to close a sale in Ontario. The lawyer reviews the agreement, deals with title, pays out your mortgage and any other charges from the sale proceeds, prepares the statement of adjustments and transfers the deed. Lawyers quote a fee plus disbursements, which are out-of-pocket charges they pay on your behalf, and tax is generally added on top.

This guide does not print fee levels or the cost of a registration, because those change and the figures were not confirmed from an official page. Ask two or three lawyers for a written quote for a sale, ask what disbursements are expected, and ask whether the quote covers a simultaneous purchase if you are buying too. Having one lawyer handle both transactions can help keep the two closings coordinated, and you can ask whether yours offers that.

Mortgage discharge and prepayment penalties

If you have a mortgage and sell before the term ends, your lender may charge a penalty to let you out of it, unless the mortgage is portable or you are allowed to take it to the next home. The Financial Consumer Agency of Canada says lenders usually charge the higher of three months' interest on the amount owing or the interest rate differential, often written IRD. The differential tends to be used mainly when your mortgage rate is higher than current rates and your contract has fewer than five years left. Administration fees can apply as well (FCAC, reduce prepayment penalties).

Two practical points follow. First, the penalty is a function of the date you close, so ask the lender for a payout statement for the specific closing date once you have an accepted offer. Second, lenders calculate the differential in their own ways. Two lenders can quote different penalties for similar loans, so read your mortgage contract, then call and ask for the formula in writing.

A discharge fee for removing the mortgage from title may also appear on the payout statement. No official figure was confirmed for this guide, so treat the lender's statement as the source. If you are weighing an early sale against waiting for a renewal date, ask your lender what the penalty would be at each date and put both numbers in your worksheet.

Closing adjustments: property tax and utilities

Property tax is billed for a period that rarely lines up with your closing date. Your lawyer sorts this out in the statement of adjustments, so that you pay your share of the period you owned the home and the buyer pays theirs. The same idea applies to some utilities and other prepaid items.

The detail depends on the municipality and the arrangement, and no official page was available to confirm a standard method for this guide. The useful habit is simple: ask your lawyer for a draft statement a few days before closing, compare it with your own tax and utility bills, and ask about anything you do not recognize. If you pay property tax in instalments, say so when you give your lawyer the details.

For owners 65 and over, property tax relief programmes may change what your last bills look like. Toronto, for example, runs increase deferral and cancellation programmes with income limits. The costs and money overview covers the wider cost picture. Whether a deferral must be repaid when you sell depends on the programme, so ask the municipality before listing.

Costs of getting the home ready to sell

Preparation is optional, but it is a real cost. It may include repairs you want to make before listings go live, cleaning, painting, staging, storage for belongings you are not taking, and a pre-listing inspection. An older home has a longer list. The guide to preparing an older home for sale describes which jobs buyers tend to ask about, and the guide to clearing out your home covers the work of sorting belongings.

List these costs separately. Some are paid before the sale, so they come out of your savings rather than the proceeds, but they still reduce what you end up with. Get quotes where you can. A repair that costs less than the concession a buyer might ask for can be worth doing, but only you and your agent can judge that for your house.

Disclosure belongs here too. In Ontario a seller does not have to disclose a defect that is plain to see, but must not conceal it, and must disclose a latent defect that makes a home unfit for habitation or dangerous. RECO describes the rule in its Bulletin 7.4 (RECO). The seller disclosure guide goes into it.

Income tax on the gain, and the buyer's land transfer tax

Two taxes sometimes get mixed into a net proceeds estimate by mistake. The first is land transfer tax, which the buyer pays, not you. It will matter to you in the other direction: on the home you buy, you pay it. The land transfer tax guide sets out the provincial and Toronto tables with worked examples.

The second is tax on the gain. If the property was your principal residence for every year you owned it, the Canada Revenue Agency says there is no tax on the gain, but you must report the sale on your return. Part-year rentals, home offices that earned income and homes held for under a year can change the answer. All of that is in the principal residence guide. For your worksheet, treat the tax line as zero only after you have confirmed your own situation with an accountant.

A net proceeds worksheet you can fill in

Use a table like this. Begin with estimates, then replace each with a quote or statement.

Run the sheet three times: at a price you would be happy with, at a price you would accept, and at a price lower than that. The costs that scale with price, like commission, will move, and the fixed ones will not. Seeing the spread tells you how much room you have when you shop for a smaller home.

Planning what happens to the money

The purchase of your next home may need a deposit before you receive any sale money, and your closing dates may differ by days or weeks. The buy first or sell first guide explains the sequencing options and what they cost in time and risk. For the wider picture, the step-by-step downsizing guide puts the money steps in order.

If you invest what remains, interest and other investment income generally counts as income in a way that a tax-free home sale does not, which can matter for income-tested benefits. Whether a home sale affects benefits like the Guaranteed Income Supplement has not been confirmed from an official page for this guide, so ask Service Canada before you rely on any rule of thumb. If your next move is to a smaller home, comparing condos, townhouses and houses will help you set a purchase budget before you finalize your estimate.

When you are ready to talk to a real estate agent about what your home might sell for, contact us. Messages go to agents on the operating team at eXp Realty. You can read more on the resources page in the meantime.