Ontario Land Transfer Tax

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Ontario Land Transfer Tax

Ontario Land Transfer TaxOntario Land Transfer Tax is charged to the homebuyer and applies whenever a land or an interest in land in Ontario is purchased,

The applicant buyer pays the Ontario’s land transfer tax at the time of purchase, the term “land” includes any buildings, buildings to be constructed, and fixtures (such as light fixtures, built-in appliances, and cabinetry).

Land transfer tax is normally based on the amount paid for the land, in addition to the amount remaining on any mortgage or debt assumed as part of the arrangement to buy the land.

In some cases, land transfer tax is based on the fair market value of the land, for example, where:

  • The transfer of a lease with a remaining term that can exceed 50 years
  • The transfer of land is from a corporation to one of its shareholders, or
  • The transfer of land is to a corporation if shares of the corporation are issued.

Current Ontario Land Transfer Tax rates as of January 1, 2017

Current Ontario Land Transfertax RateFirst-time homebuyers rebate

Up to December 31, 2016, first-time homebuyers qualify for up to 2,000 land transfer tax rebate.

Ontario Land Transfer Tax rates as of January 1, 2017

Ontario Land Transfer Tax Rate

From January 1st, 2017 onwards, the new Ontario Land Transfer Tax for first-time home-buyers will be exempted on the first 368,000 of a land purchase price and first-time home-buyers will also be eligible for up to a 4,000 tax rebate on the non-exempted amount.

Also from January 1st, 2017 the new Ontario Land Transfer Tax rate increases on properties which purchase price exceeds 2 Million, the increase is to 2.5% from a 2%.

An appraisal of the properties before the purchase is most likely going to be ordered.

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Gifted down payment

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Gifted Down PaymentGifted down payment

Gifted down payment are funds given to a mortgage applicant by an immediate family member to be used to qualify for a mortgage or simply to lower the mortgage amount. It is a very common and popular mechanism used by parents or siblings to support their family members financially without expecting the support being paid back

If you are planning to buy a home using a gifted down payment, you need to understand who can this Gifted down payment may come from, and, what are the mechanisms to be followed for it to be accepted.

The Government of Canada recently announced the minimum down payment requirement will be increased from 5% to 10% on the portion of a purchase price for a property that is above $500,000 but less than $1 million on insured mortgages. This change will take effect on February 15, 2016.

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Who can offer a Gifted down payment?

Immediate family members (i.e. parent, grandparent or sibling). Gifts from spouses are not acceptable.

How can a Gifted down payment be used?

A Gifted down payment can be used provided that the funds are properly verified, are non-repayable and all other characteristics of the borrower are acceptable. In most cases Gifted down payment is required to be on the applicants’ account 15 days until the time of closing.

A letter must contain the following information

  • The amount of the gift
  • A statement that the gift is non-repayable and is from non-borrowed funds
  • The full names of the mortgagor and Giftor (s),
  • The relationship between the mortgagor and the giftor(s) and
  • The reason for the gift.
  • The deposit or cheque confirming the funds have been received must be obtained.

Acceptance of Gifted down payment is subject to verification

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