Buying your first home is both exciting and intimidating. All those fees add up quickly, and if you’re not prepared for them, it could mean tough times come closing day. Understanding all the various fees that come with buying a home in Canada is important, and the Land Transfer Tax is one of them. Here’s what you need to know about it.
What is it?
Land Transfer Tax is the tax paid by buyers to the province upon closing of the sale of property. Unlike many other mortgage closing costs, it must be paid upfront in cash, and can’t be rolled into your regular mortgage payments. This tax varies from province to province, but each one has it in some form or another.
How much should I expect to pay?
It depends on which province you are located in. Because markets like Vancouver and Toronto are so hot, this tax is much higher in BC and Ontario. Other provinces like Manitoba and Saskatchewan have only minimal land transfer taxes in comparison. Toronto residents actually have to pay the land transfer tax twice: once to the provincial government and once to the municipal.
In certain provinces, first-time buyers can catch a break.
Since the market has become so hard for many young people to break into, initiatives have been put in place to help relieve some of these extra costs that can deter someone from purchasing their first home. Some provinces provide a significant rebate for first-time buyers.
Work with someone to find out the fee ahead of time.
If you’re not a first-time buyer, it’s imperative to look into just how much you’ll be expected to pay at closing for this fee. Work with your agent or mortgage lender to crunch the numbers as soon as possible so that you know exactly how much money you’ll have to put down on closing day. It is due immediately, so if you haven’t saved up for it, you could leave your family in a precarious financial situation.