New City of Toronto Land Transfer Tax

On October 22, 2007, Toronto City Council approved a new land transfer tax, which takes effect on February 1, 2008 at the following rates:

1. One-half of 1 percent of the value of the consideration for the conveyance, up to and including $55,000.
   
2. 1 percent of the value of the consideration which exceeds $55,000, up to and including $400,000.
   
3. 1.5 percent of the value of the consideration which exceeds $400,000, up to and including $40 million.
   
4. 1 percent of the value of the consideration which exceeds $40 million; and
   
5. notwithstanding (3.) and (4.), 2 percent of the value of the consideration for the conveyance which exceeds $400,000, if the conveyance is a conveyancy of land that contains at least one and not more than two single family residences.
   

The first bank to respond (November 19, 2007) was BMO Bank of Montreal. BMO Bank of Montreal announced they would pay the new City of Toronto land transfer tax on behalf of its customers when they arranged a mortgage by February 29, 2008. The bank will cover the new land transfer tax up to 1.5% of the mortgage amount.

Similarly, on November 22, 2007, TD Canada Trust announced that it would cover the new City of Toronto land transfer tax when a customer arranged a mortgage between November 22, 2007 and March 21, 2008. Again the coverage is up to 1.5% of the mortgage amount.

Many banks offer cash-back programs in excess of 1.5% of the mortgage amount. However, they typically require the home buyer to take a posted rate. If the new "limited-time" offers can be arranged at broker-discounted rates, then these are genuinely good offers.

Blair Anderson, Broker
Anderson Associates Mortgage Brokers
blair@anderson.ca

First-Time LTT Update

Further to the post on December 14th, we have some updated information for you. Right now, everything is still in the proposal stage. It seems that first-time buyers of resale properties that signed their agreements on December 14, 2007 or later, will qualify. Because it is at the proposal stage, and is not yet a formal law, those buyers that do qualify will have to wait to apply directly to the Ministry after closing (and after the proposal has officially been passed) to receive the refund amount. Our current information is that the proposal is not likely to become law until March 2008, since it still has to go through several readings before approval. It is still possible that the proposed change may not pass, but that seems unlikely at this stage.

We wish everyone a healthy, happy holiday season!

Great News for First-Time Purchasers!

It was recently announced that the Land Transfer Tax Refund for First-Time Buyers will be expanded to include resale homes. Formerly this refund was only available to first-time buyers of new homes. The limit of the refund will remain $2,000.00.

In order to qualify as a first-time buyer, an individual must not have owned a home anywhere in the world, or been married to someone who owned a home, while he or she owned that home.

The refund is capped at $2,000.00. In other words, if the total LTT were $3,000.00, the individual would be responsible for paying $1,000.00. The refund can also be applied in part. If two people are buying a property, and only one qualifies, the refund would be applied according to that individual's percentage ownership (ie. if purchasing 50%, 50% of the refund; 75% owner, 75% refund and so on).

More information regarding the logistics of the expanded rebate should be released this afternoon. We'll know then which agreements qualify (ie. when they had to have been signed, etc). We'll update when we know more!

Link to the anouncement: http://www.fin.gov.on.ca/english/media/2007/nr12-fes2.html

First-Time Buying

To start out with, I thought I’d share my recent experience with being a first-time home buyer. I work at a law firm that does a high volume of real estate deals, and I was talking to a lot of people my age or younger who were buying houses, or who were already purchasing their second home. I was paying rent, and had a decent amount of money saved up, so I talked with my husband and we decided that we would start looking for a house.

The first thing we did was go to the bank so that we’d know what price range we could realistically afford, based on the mortgage amount we were approved for, and our projected down payment amount. We were able to find out the range we would be approved for, but more importantly, what the approximate monthly payments would be on those amounts. Based on those numbers I prepared a budget based on what I was spending at the time, and projecting the extra costs that come with ownership-property taxes, property insurance, utilities, and the mortgage payments. I was as detailed as I could be with the budget, down to the $4.00 I put into the office lottery pool each week. It’s human nature that we’re never going to be able to save as much in real life as we should on paper, so I added in another $200.00 a month for miscellaneous items. Preparing that budget helped me realize that the bank is willing to approve me for a mortgage that my salary will cover, but that doesn’t leave me any leftover money for things like food and gas, among other things.

Armed with that information, we knew our general price range. We looked at a few places, fell in love with one, and were lucky enough to have our offer accepted. We went back to the bank and the mortgage was approved after the appraisal came back positive.


So, some tips:
1. Make sure that you know what you can get approved for, and what you can afford, before you start looking at houses. It’ll save you a lot of time, and you can avoid putting in offers on homes that you won’t get approved for.
2. Remember that a pre-approval from a lender doesn’t mean that you can borrow that amount on any home-you still need to obtain an approval for that specific property. In other words, if the bank pre-approved you for a mortgage of 300K, and you put in an offer on 10 Main Street, but the bank only appraises that property at 250K, they aren’t going to give you the money.

That was a quick overview of my experience, in future posts I’ll have some information based on common questions clients have for us, and anything new that we come across. Feel free to email with any questions or topics that you’d like addressed.