This is one of the costs that surprises my clients the most, because it's not part of the home's price or the down payment, it's a separate tax paid on closing day. Here's exactly how much it is, and why buying inside Toronto costs more than buying in the rest of the GTA.
It's a tax paid in Ontario every time a home's ownership is transferred into your name. It's calculated as a percentage of the purchase price, in brackets, and the higher the price, the higher the percentage on each bracket.
Ontario's rates are: 0.5% on the first $55,000, 1.0% on the portion between $55,000 and $250,000, 1.5% on the portion between $250,000 and $400,000, and 2.0% on everything above $400,000.
If you buy within the city of Toronto's limits, on top of Ontario's land transfer tax, you pay a second municipal tax (the Municipal Land Transfer Tax or MLTT), with brackets nearly identical to the province's. In other words, in Toronto you pay the same type of tax twice.
For example, for a $700,000 home, Ontario's land transfer tax would be $10,475. If that same home is within Toronto, the municipal MLTT is added, which in this case would also be $10,475, for a total of $20,950. If that same home were in Mississauga, Vaughan, Markham, or any other GTA city outside Toronto, you'd only pay the provincial tax, meaning $10,475.
The good news is that if it's your first home, you can recover part of this cost. Ontario offers a rebate of up to $4,000 on the provincial tax. If you buy within Toronto, you can also recover up to an additional $4,475 on the municipal tax.
Following the example of the $700,000 home in Toronto, you'd pay $20,950 in total, but with both rebates applied, your net cost would drop to $12,475. If that same home were outside Toronto, your net cost, after the $4,000 rebate, would be just $6,475.
To qualify you need to be at least 18 years old, move into the home as your principal residence within the next nine months, never have owned a home anywhere in the world (neither you nor your partner while you were together), and be a Canadian citizen or permanent resident. The application is filed within 18 months after closing.
Because on top of Ontario's provincial tax, the city of Toronto charges its own municipal tax (MLTT), with similar brackets.
Up to $4,000 on the provincial tax, and if you buy in Toronto, up to an additional $4,475 on the municipal tax, for a combined maximum of $8,475.
No. It's paid separately on closing day, along with one of our lawyers' fees, so it's important to budget for it separately from your down payment.
If you want us to calculate together what this cost would be for your specific budget, send me an email with your question at contact@nataliarendon.ca, or I'll see you at the free seminar "From Renter to Homeowner: How to Buy Your First Home in Canada".