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First Time Home Buyers and Related Rebates

The rising cost of residential real estate in Ontario has made it increasingly difficult for first time home buyers to gain entry into the real estate market. This problem has been magnified in the GTA since the introduction of the Municipal Land Transfer Tax (“MLTT”) in 2007, passed under the City of Toronto Act which places an additional burden on purchasers in the GTA by essentially doubling the amount of land transfer tax due on closing. When coupled with escalating costs associated with owning a home it becomes crucial that agents, often acting as a buyer’s gateway into the market, make certain that their clients are aware of and understand the additional costs associated with purchasing and carrying a home.

In Toronto and Ontario, land transfer tax rates are calculated as follows:

Toronto 0.5% of the sale price up to and including $55,000 1% of the sale price between $55,000 up to and including $250,000 2% of the sale price exceeding $400,000

Ontario 0.5% of the sale price up to and including $55,000 1% of the sale price between $55,000 up to and including $250,000 1.5% of the sale price between $250,000 up to and including $400,000 2% of the sale price exceeding $400,000

In an attempt to assist first time buyers, both the Province and the City have implemented rebate programs for first time buyers. However, to classify as a first time home buyer, a purchaser or their spouse, if applicable, cannot have previously owned a home anywhere in the world, regardless of whether they personally occupied the home.

With respect to the provincial rebate, the maximum available amount is $2,000. Toronto by comparison offers a more generous rebate of up to $3,725. For example, if a qualified, first time buyer purchases a home in the GTA for $650,000 the provincial portion of the land transfer tax due on closing would be $9475 less $2,000 for a total of $7475. The Toronto, or municipal portion due on closing would be $8725 less $3725 for a total of $5000. Any unused portion of the provincial and municipal rebate cannot be carried forward.

Often situations arise where a married couple has purchased a property and only one of the two spouses qualifies for the rebate. In such circumstances, leaving aside issues of estate, tax and family law, the couple can be registered on title as tenants in common with the eligible spouse owning a 99% share of the property with the non-qualified spouse retaining a 1% interest. In this situation, the eligible spouse will be entitled to 99% of both the provincial and municipal land transfer tax where applicable.

ABOUT THE AUTHOR: Jeremy Mandell, LLB, is an associate with the law firm Garfinkle, Biderman LLP, a full service firm of 19 lawyers located in downtown Toronto with a satellite office at Yonge and Sheppard. Jeremy’s areas of practice include all areas of commercial and residential real estate.  Tel: (416) 869-7608 jmandell@garfinkle.com.

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