Now that the closing date for your home purchase has arrived, you can begin the process of becoming a homeowner by obtaining the mortgage funds and house keys. Your home transaction will not be complete until you pay a number of closing costs, the largest of which is the land transfer tax, so your wallet will still need to work hard. Unlike your mortgage, this tax must be paid in cash and is based on the entire purchase price of the property. It is imposed by the province as well as the City of Toronto at the municipal level.
How Do Average Home Prices Influence Land Transfer Tax?
The amount that buyers of LTT homes must pay varies greatly, just as the average price of homes varies greatly throughout Ontario’s major housing areas. A buyer in the City of Toronto, for instance, where the average property price in September was $864,275, will be severely hit with $27,521 in LTT—an extra $3.2% of the overall cost of buying a home! On the other hand, in Sault Ste. Marie, where the average cost of a property is $164,853, the buyer will only have to pay $1,374 in taxes at closing, or 0.8% of the entire cost.
On the other hand, purchasers in mid-range Ontario areas should typically budget between $5,000 and $7,000 for LTT. For example, the tax on a $479,904 home in Kitchener would be $6,073, whereas, in the London real estate market, consumers spending an average of $391,846 would pay $4,353 in taxes at closing. Buyers entering the Ottawa real estate market would pay $5,467 on LTT based on the average local property price of $449,613, while those in Hamilton, one of the Greater Golden Horseshoe’s fastest heated markets, would pay $6,482 on the average home price of $500,365.
But in Mississauga, where the average house price is greater at $734,901, the tax amount increases dramatically, reaching $11,173 in LTT paid.
How Land Transfer Tax Challenge Repeat Buyers?
The good news for first-time homebuyers is that there are sizable rebates available to lessen the impact of LTT: for local buyers, $4,475 from the City of Toronto and $4,000 from the province of Ontario. Furthermore, in six markets across the province—Saut Se. Marie, Thunder Bay, North Bay, Sudbury, Windsor-Essex, and Kingston—first-time homebuyers who purchase a property valued at less than $368,360 effectively pay no LTT at all. LTT closing costs can add tens of thousands of dollars to a buyer’s real estate bill, so be sure to factor them in when planning your budget for your next home purchase. This can be particularly difficult for purchasers in the most desirable markets since they have to save more money or wait longer to have that cash on hand. It is a clear disadvantage in a market where prices are rising faster than in others where average home prices are more stable.
You May Also Read :
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Guide To BC Foreign Buyers Tax |
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Know The Property Tax Bill in Canada |
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All About Municipal Accommodation Tax in Canada |
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Understand Income Tax in Canada |
