From mortgage insurance to lawyer fees, there are many costs of buying a home that are additional to the actual cost of the home. While most homeowners are aware of most of the additional costs, the provincial land transfer tax in Ontario often catches homebuyers by surprise, especially first-time home buyers.
Levied by the Ministry of Finance, total land transfer tax depends on the purchase price of the property to which it applies.
Calculating Ontario Land Transfer Tax
Paying land transfer tax (LTT) is the largest closing cost of purchasing a home in Ontario. Land transfer tax rates are set according to a sliding scale that sets different tax rates for different portions of the purchase price of the property.
- First $55,000.00 | Tax Rate: 0.5%
- $55,000.01 to $250,000.00 | Tax Rate: 1.0%
- $250,000.01 to $400,000.00 | Tax Rate: 1.5%
- $400,000.01 to $2,000,000.00 | Tax Rate: 2.0%
- Over 2,000,000.00 | Tax Rate: 2.5%
Your real estate lawyer will arrange for your total LTT to be paid when ownership of the home is transferred to you.
Ontario Land Transfer Tax Rebates
If the LTT is an often unforeseen cost, the first-time homebuyer land transfer tax refund can be a pleasant surprise. It means first-time buyers can get a refund of the entire LTT, up to $4,000.00, as long as they meet the following criteria.
- Buyer must be a Canadian citizen or permanent resident of Canada
- Buyer must be over 18 years old
- Buyer must occupy the home within 9 months of purchase
- Buyer cannot have owned a home anywhere in the world
- Buyer’s spouse cannot have owned a home while being the buyer’s spouse.
Toronto Land Transfer Tax
If you’re looking for Markham houses for sale and don’t care for the thought of paying the LTT, at least you’re not buying a home in Toronto. The city of Toronto also has its own municipal land transfer tax that’s charged in addition to the provincial LTT. Similarly calculated as the Ontario LTT, it effectively doubles the LTT that must be paid on the purchase of a property located in Toronto.
If you liked this post, check out our recent article on three important questions to ask when buying a house.