The land transfer tax is considered by many people to be one of the least desirable aspects of buying a home in Ontario. Still, it is an inevitable part of homeownership in the province.
When a buyer purchases either a condo or a house in Ontario, they will need to pay a land transfer tax on the property. Please note that the seller of said condo or home will not have to pay any such tax. Here, we will discuss what the land transfer tax is and how it is calculated in the Province of Ontario.
Who pays the tax?
As mentioned, the buyer of a condo or house in Ontario will have to pay a land transfer tax on the newly bought property. Their lawyer will ensure that the land transfer tax will be paid when the deed to the property is transferred in the seller’s name on the closing day.
However, there may be some good news for certain Ontarians, as first-time homebuyers in the province may be eligible for a tax refund on their land transfer tax if they qualify for the Land Transfer Tax Refund Program.
The Land Transfer Tax in Ontario
The tax is based on a sliding scale, whereby the tax percentage will be 0.5% of the value of the home if the total amount paid is up to $55,000. The tax rate goes up to 1% for homes valued between $55,001–$250,000, and goes up to 1.5% for homes sold for $250,000 to $400,000.
In addition, the land transfer tax rate in Ontario will be 2% of the value of the property if it is sold for $400,001 to $2,000,000, and will go up to 2.5% if the home’s value exceeds 2 million dollars, where the land also contains 1 or 2 single family domiciles.
How the Land Transfer Tax is Calculated
If you were to use a land tax transfer calculator to get a more accurate figure, then you would first need to enter the asking price into the calculator. For instance, if the asking price for the home you want to buy is $1,000,000, then you would get the total mortgage required based on the down payment that you are willing to place on the home.
For example, if you were to place a down payment of 20% on the home, and there was no mortgage insurance included, then the total mortgage amount would be $800,000.
You would then need to enter the amortization period (i.e., 5 to 30 years) as well as the mortgage type (i.e., fixed-rate vs. variable rate) and rate (e.g., 2.79%). Depending on the type, rate, and amortization period, the figure yielded will be quite different.
Even the payment frequency (e.g., monthly, bi-weekly) will have an impact on your total mortgage payment. In any event, you will need to pay at both the provincial and municipal levels. However, if you are a first-time home buyer in Ontario, then you will likely receive a rebate.
For example, if the land transfer tax on your home was $32,950 originally, then you may receive a rebate of $8,475 if you are a first-time home buyer in the province. To learn more about the land transfer tax in Ontario and how it is calculated, please visit our website.