Additional costs for home buyers
In addition to the purchase price, legal fees and disbursements, you will normally incur a number of additional expenses, including land transfer tax, GST, and adjustments.
Land Transfer Tax
One of the largest additional expenses when purchasing a property in Ontario is the provincial Land Transfer Tax and Toronto Land Transfer tax, if applicable. This is calculated at $5 per $1000 of the first $55,000 of the purchase price, then $10 per $1000 from $55,000 to $250,000, and $15 per $1000 of the purchase price above $250,000. For example, the total land transfer tax payable by the purchaser of a $100,000 property would be $725, while the land transfer tax on a $375,000 property is $4,250. There is no tax payable by the seller. If you are a first time home buyer of a newly constructed home, you may qualify for a rebate from the Ontario government. Your lawyer or your real estate agent can provide you with more information about land transfer taxes and the first time buyers rebate.
GST on the purchase price
GST does not normally apply to the purchase price of used homes. If you buy a new home, GST will be payable. *GST is 5% of the purchase price, but most purchasers who buy a property for personal use are entitled to a rebate of up to 2.5%, depending on the purchase price and area. Many builders include the GST in the purchase price, while others charge the GST in addition to the purchase price. If you are buying a newly built home, you should make sure you know what the total purchase price is, including GST. Commercial transactions usually require payment of GST.
*Note: HST will be applied to fees effective July 1st, 2010.
GST on transaction costs
Even if GST is not payable on the purchase price of your home, GST is payable on most transaction costs, such as legal fees and disbursements, real estate commissions, appraisals, home inspections, and survey fees. GST is not payable on Land Transfer Tax or mortgage insurance fees.
If your purchase includes appliances, furniture or other items which are left in the home, you may also have to pay Ontario retail sales tax of 8% on the value of these items.
The closing will be “adjusted” to reflect the expenses of the property that should be paid by the seller and those that should be paid by the purchaser for the number of days of the year each of the parties will own the property. For example, the purchaser will be required to reimburse the seller if the seller has prepaid any property taxes. If a home is heated by an oil furnace, the seller will usually fill the tank before closing and the purchaser will pay the seller the cost of the full tank.
Purchasers may also need to pay for mortgage insurance if they have less than a 25% downpayment, or for a survey of the property if the seller is not able to provide them with one.
How to determine your total expenses
It is very important to know in advance how much money you will actually receive from the sale of a property and how much you will need for your purchase on the closing date. We will be able to calculate most of these costs for you and provide you with an estimate of these total amounts.