Closing costs are taken care of at the very end of the home-purchasing journey. They are generally due the week of your possession date or sometimes even the day of. One of the major costs you’ll have to budget for is land transfer tax.
Land transfer tax (LTT) is charged by the province (and at a further municipal level in the City of Toronto) and is determined based on the total purchase price of the home and must be paid upfront. However, there are rebates for first-time home buyers in Ontario of up to $4,000.
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To find out how much buyers would have to pay in LTT, we analyzed 35 different markets across Ontario to see where prospective buyers will pay the most and least, and how much more expensive it would be for repeat buyers to purchase a new home without the help of a rebate.
More Expensive Homes Mean More Expensive LTT
First-time buyers looking to purchase a home will face higher land transfer tax in markets with more expensive home prices. Buyers in Toronto could pay $29,289 in LTT for a home at the current average price of $1,120,362. On the other end of the spectrum, first-time buyers in Sault Ste. Marie and Thunder Bay would not have to pay any LTT due to the first-time home buyer rebate of $4,000, as the LTT for a home at the respective average prices is less than the rebate. The lowest LTT is in Sudbury, where a home at the average price of $423,400 would pay $963 in LTT.
Buyers in markets where the home price is lower than the national average of $686,371 can expect to pay around $6,000 or less, with London the closest to that, with an average price of $662,892 and LTT of $5,733. Anyone buying a home for less than $1,000,000 can probably expect to pay less than $10,000 in LTT. Ajax is the lowest-priced city over the $1M mark, at an average price of $1,002,020, buyers can expect to pay $12,125 in LTT on a home at that price.
The Market Is Less Forgiving For Repeat Buyers
Repeat buyers are unfortunately not entitled to a rebate, adding $4,000 to their LTT bill whenever they buy a home. This affects Toronto buyers the hardest, as the municipal tax added means the tax increases to a cost of $37,764 on a home at the average price. Sault Ste. Marie and Thunder Bay’s bills for repeat buyers will be around $2,587 and $3,146 respectively, while Sudbury rounds out as the only other city with an LTT lower than $5,000 at $4,943.
The $10,000 threshold is hit a lot earlier, and buyers paying more than $700,000 on a home will likely have to pay LTT in that range. Barrie is the least expensive city by home price for repeat buyers to have an LTT of over $10,000, with an average home costing $725,965 and LTT costs of $10,994.
LTT can add thousands of dollars to a potential buyer’s closing costs. It’s important to consider this when budgeting for your home purchase. This can be especially challenging for buyers in hotter real estate markets, particularly as prices continue to rise in the face of short supply.
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