If you are a first-time buyer of real estate in Ontario, you are in luck: the Ontario government has many programs in place to encourage you to buy instead of rent. Today, I am going to blog about the Land Transfer Tax rebate.
Land Transfer Tax is imposed by the provincial government on all purchases of property in Ontario (with an additional tax imposed by the City of Toronto for properties purchased there after December 13, 2007). It is equivalent to approximately 1.5% of the purchase price. Land transfer tax can be a burden to many buyers, particularly first-time buyers who are just getting into the housing market.Fortunately, the Ontario government has a rebate program in place to offer relief to first-time buyers.
Originally, the rebate was only available to buyers of new homes; in addition to rebates on GST/PST (now HST), first-time buyers of brand-new homes received a rebate on Land Transfer Tax in order to encourage them to buy new. After some time, the government decided that people should also be encouraged to buy resale homes, and the Land Transfer Tax rebate was extended to resale homes as well.
Here are the rules:
1. You can never have owned property before, anywhere in the world.
2. You can never have lived in a home owned by your spouse (legally married, three years common law or have a child together).
3. The agreement of purchase and sale must have been entered into no earlier than December 14, 2007.
4. You must intend to live in the house as your principal residence within 9 months of the date of closing.
If you are able to fit into all of these rules, you can get a rebate of up to $2,000.00. This is taken right off the amount of Land Transfer Tax, so there is no need to pay up front and wait for a refund. For example, if Land Transfer Tax would have been $2,150.00, land transfer tax owing by a first-time buyer would be $150.00. If land transfer tax would have been $1,825.00, there would be no land transfer tax owing.
There is also some relief for first-time buyers married to, or buying property with, people who have owned property before. Suppose, for example, your spouse owned a house before you met, and then sold it to move to a new city. You have been living in an apartment together, and now are going to buy your first home together. Since you didn’t live in the house with your spouse, you are entitled to the rebate, but your spouse isn’t as a former homeowner. The rebate will therefore be cut in half, and you will get a rebate of $1,000.00 (assuming you are buying as joint tenants). You can also get higher percentage rebates if you buy as tenants in common; this is common where a first-time buyer has a parent guaranteeing the loan, and the bank requires the parent to go on title. If it is strictly for financing reasons, you can go on title to 99% of the home, and your parent to 1%, and you can get 99% of the rebate.
This program is one of many designed to help first-time buyers get into the market and own their own homes.
