Posted onMarch 06/2017
When people think of buying a home, they often forget about land transfer tax. People tend to be so preoccupied with finding the perfect property, coming up with a down payment and securing a mortgage that they overlook the other costs associated with home buying. Land transfer tax (LTT) is an important aspect of buying a property. Here are five things you need to know about LTT, from who pays it to how to find a land transfer tax calculator.
What is land transfer tax? In Ontario (and every province in Canada with the exception of Alberta and Saskatchewan), you are required to pay a fee when land is purchased. Land is defined as any building that currently exists, or parcels of land where a building (or buildings) will be constructed.
Who pays land transfer tax? Anyone who is purchasing land in Ontario has to pay LTT. Furthermore, if you are buying a place in Toronto, the city itself has its own land transfer tax that is added onto the provincial one. LTT is paid when the transaction of the land closes. For instance, if you are buying a home, you would pay land transfer tax upon the closing date of the sale.
How is land transfer tax calculated? The amount you pay in land transfer tax is based on the total amount you’re paying for the land or the fair market value of the land. The latter only applies when a lease is being transferred or is going to a shareholder from a corporation. Some limitations apply to ensure that buyers aren’t paying an astronomical amount in LTT:
0.5% up to and including $55,000
1% above $55,000 up to and including $250,000
1.5% above $250,000
2% above $400,000 for land containing 1-2 single family residences
How can I calculate my land transfer tax? To calculate how much your land transfer tax will be, you will need to use a land transfer tax calculator. You can use the land transfer tax calculator we provide at Northwood Mortgage. You will need to know the purchase price of your home to get an accurate number.
Are there rebates for first-time homebuyers? Luckily, there are LTT rebates available for first-time homebuyers to take advantage of. In order to receive a land transfer tax rebate, you need to be at least 18 years old and occupy the house (or condo) on the land within nine months of the closing date, and you or your spouse/partner cannot have owned interest in or purchased a home anywhere else in the world.
If you have trouble using the land transfer tax calculator or need more information about LTT, please do not hesitate to contact us