Land Transfer Tax / Property Transfer Tax in Canada

If you decide to purchase a property, in Canada, you will be required to pay a tax to the Ministry of Revenue/Finance, in the province where you are buying.

This tax is commonly referred to as the “Land Transfer Tax” or the “Property Transfer Tax”.

The tax is usually paid to the Ministry of Revenue, within the Province and the tax is calculated based on the fair market value of the property, using a certain formula.  The formula used to calculate the land transfer tax portion varies greatly from province to province.  I used Ontario’s formula, as an example.  Here is how the Land Transfer Tax is calculated for a property purchased in Ontario:

The first $55,000 is taxed at 0.5%

The next $195,000 is taxed at 1%

The next $150,000 is taxed at 1.5%

And the remaining $250,000 is taxed at 2%.

So if you purchased a home for $300,000 in Ontario, your Land Transfer Taxes payable would be calculated as follows:

The first $55,000 is taxed at 0.5% or 0.005 * $55,000 = $275

The next $195,000 is taxed at 1% or 0.01% * $195,000 = $1,950

The next $150,000 is taxed at 1.5% or 0.015 * $50,000 = $750

And the remaining $250,000 is taxed at 2% or 0.02 * $0 = $0

The total Land Transfer tax payable is:   $275 + $1,950 + $750 = $2,975

If you decide to purchase a property in Ontario, and within the City of Toronto, you will be required to pay an additional tax, called the Toronto Municipal Land Transfer Tax and this is calculated as follows:

The first $55,000 is taxed at 0.5%

The next $345,000 is taxed at 1%

And 2% on the entire portion over $400,000.

So using the above formula, a home valued at $300,000 will result in an additional tax of:

The first $55,000 is taxed at 0.5% or 0.005 * $55,000 = $275

The next $345,000 is taxed at 1% or 0.01% * $245,000 = $2,450

And 2% on the entire portion over $400,000 is taxed at 0.02 * $0 = $0

The total Toronto Municipal Land Transfer Tax payable is:   $275 + $2,450 = $2,725

Land Transfer tax payable $2,975 + Toronto Municipal Land Transfer Tax payable is $2,725 = $5,700 !!

I decided to do some research to just compare all of the provinces and territories to see which provinces/territories had the highest and which provinces/territories had the lowest land transfer taxes.

The table below is based on a $300,000 purchase price and the data was collected as of July 31, 2010.

I was very surprised (well actually not) that the results show Ontario (Toronto buyers) are paying the HIGHEST land transfer taxes, compared to any other city in the country!!

Provinces and Territories	Estimated Land Transfer Tax Payable
Home Purchase Price = $300,000
Ontario (city of Toronto area*)	$5,700
Nova Scotia (Halifax county)	$4,500
British Columbia	$4,000
Manitoba	$3,150
Prince Edward Island	$3,000
Quebec	$3,000
Ontario (not the city of Toronto)	$2,975
Newfoundland	$1,250
Saskatchewan	$915
New Brunswick	$805
Yukon	$750
Northwest Territories	$490
Alberta	$335
Nova Scotia (not Halifax county)	$150

Information gathered as of July 31, 2010.  This information is not guaranteed and therefore should not be relied upon without verification.  E.&O.E.  * Those who purchase in the City of Toronto, are also required to pay the Toronto Municipal Land Transfer Tax

This article written by Elizabeth Blair on July 31, 2010.  Elizabeth is a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.  Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit any of her active websites at:

http://www.missmortgage.ca

http://www.burlington-mortgage.ca

http://www.oakville-mortgage.com

http://www.streetsville-mortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca

Lic # M08005880 / Brokerage Lic # 10680

Head office is located at:  15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

Value of Home Improvements

You may be thinking about those spring-time projects that you will need to tackle this year, like landscaping the garden, rebuilding a patio or fence, changing older windows and doors, a new roof, or even remodeling your basement, kitchen or bathroom.  If you tune in to some recent popular TV programs like “Extreme Makeover – Home Edition”, you will surely catch the home makeover bug.    If you live in a freehold house, you should be spending an average of 1% of your home value annually, on maintenance, just to keep it in good repair and to prevent it from declining in value, according to “Home Buying for Dummies” by Eric Tyson and Ray Brown.

Renovating a home, may also be an important consideration for you in 2010, if you are thinking of listing your home for sale.  Remember that the right renovations can help you to maximize the resale value of your home.    The renovation payback statistics were extracted directly from the Appraisal Institute of Canada’s website and the data is current as of January 2010:

To see the table, please click on the link:

renovations table

You can check your renovation investment plans using the Appraisal Institute of Canada’s on-line tool.   The name of this tool is RENOVA and it is an excellent resource for homeowners.   You may visit the site by going to this website:

http://component.aicanada.ca/e/resourcecenter_renova_all.cfm

Remember that the referenced website link is only a guide, and you should always carefully consider that proper appraisal values and returns can be provided by an accredited appraiser holding a CRA or AACI designation.  It is also important to mention that an appraiser will also assess other factors, about the home to complete accurate appraisal results, for example, the neighborhood, recent real estate activity, lot, location, etc.

Canada AM has been running an informative real estate market series that commenced on January 25, 2010.  Featured on Tuesday’s program was Mr. Ed Saxe of Edjline Appraisal Services.  Mr. Saxe is a certified Canadian Residential Appraiser as well as the President of the Ontario Association of the Appraisal Institute of Canada.    Mr. Saxe discusses that the number one investment returns come from kitchen and bathroom renovations, however, as a homeowner, he advises that discretion is required when spending.   Mr. Saxe advises homeowners to carefully consider just how much they are spending and where they are spending.   For example, he mentions that you would not be wise to spend $50,000 on a kitchen renovation if you are living in a home that is only worth $200,000.  A home renovation should be relative to the market and the neighborhood in which you live.   You can view the current live video clip at the following link:

http://watch.ctv.ca/news/top-picks/added-value/#clip259603

This blog was written by Elizabeth Blair of Mortgage Edge.

Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at:    http://www.missmortgage.ca

Lic # M08005880 / Brokerage Lic # 10680

The Evil IRD Penalty

The IRD penalty (Interest Rate Differential) has become a very hot topic in the last year.  With the recent plunge in interest rates, many fixed rate mortgage holders, have contacted their banks to find out what it would cost to break their mortgage term in pursuit of today’s much lower mortgage rates.

Many are shocked to find out that the IRD penalty is so high, that breaking their mortgage has even become impossible for some as it would eat up any small amount of equity that they managed to build. If you are selling a home outright, add to this penalty amount, the real estate fees to sell, and many are completely trapped and unable to find the extra cash they need, in their home equity, to move away from the mortgage obligation.   The IRD penalties are often huge and in most cases are absolutely outrageous.

I have experienced the same feedback from my own clients, who have made these calls. A recent client discovered their penalty would be $20,000……..I compare this kind of penalty charge to a form of predatory lending…….perhaps similar to the behavior of a loan shark? Is that too strong a term to use? Maybe not when you consider that while the bank won’t break your legs, or threaten your family’s safety, their imposed IRD penalties could very well “cripple you financially” …..now you know why I compare it to loan sharking.

In difficult times, when many home owners are already struggling to make ends meet because of lost jobs, pay cuts, ex-spouses no longer receiving child support, others struggling to maintain support payments, and others with unexpected requirements to move a family out of a house, would it not make sense for banks to re-visit their IRD penalty policy and agree to settle for a 3-month interest only?   Everyone else has been expected to reduce their expectations, so why are the banks not doing the same for their customers, especially in light of the current financial devastation, being faced by many individuals and families today?!

Consumers and industry professionals need to stand up against the IRD penalty as it is quietly eroding and undermining the financial stability of many households who have decided to re-finance or to get out of a current fixed rate mortgage.

Here also, is a link to a website where there has been much lively discussion, about the IRD penalty, sponsored by Ms. Ellen Roseman, of the Toronto Star.   You will see many shocking personal stories of mortgage holders who have faced the reality of the IRD penalty.   It is even more shocking to see that our own government has done nothing to protect consumers, even after many have already written their personal stories to organizations like “Ombudsman Ontario”.   Here is the link:

http://www.ellenroseman.com/?p=414

I believe that there will be great negative fallout, for many home owners down the road, unless home owners are given the option to freely re-finance their mortgages to obtain lower rates now as rates remain low.   Once mortgage rates climb, those who are very new home owners, who took out 35-year amortizations 5 years ago, have accumulated little equity and at the same time increased their household debt-load, their ability to carry a mortgage renewal, at a higher mortgage rate, will be a huge challenge.

Government must step in and force banks to change the rules. The IRD Penalty should be illegal and banks should be limited to charge only the standard “3-month interest penalty” instead of the IRD penalty being used today.    I already see it choking many mortgage holders, today, who are simply looking to move out of a higher mortgage rate into a lower mortgage rate, or perhaps even get out of a mortgage obligation due to current financial pressures, for example, a lost job.

I just returned from visiting the States and read an article in the USA Today.   It discusses how Texas banks have held a strong position, based on their tight regulations, even when many other banks around them failed.    An especially interesting point, in this article, is that the state of Texas prohibits banks from charging high mortgage penalties …… Canadian banks should also be prohibited from using the IRD penalty calculation.   You can read the article in the USA Today, at the following link:
http://www.usatoday.com/money/economy/2009-12-28-texas-banks_N.htm

Ottawa is presently reviewing Canadian mortgage rules and may change financing rules to increase minimum down payments and decrease the extended amortization of mortgages (currently at 35 years) – these would be very positive moves to make.   Texas banks have done well and their tough guidelines governing the mortgage financing industry have been the very reason why a housing fallout there, has been minimal.

If you want to express your concern about the IRD penalty, and you live in Mississauga or Streetsville, you should write to the Honourable Bonnie Crombie, Member of Parliament, for Mississauga and Streetsville areas, to request that the Government work to remove the IRD penalty, in use today, by our banks.

Her email address is:
crombie.b@parl.gc.ca

This post was written by Elizabeth Blair, a licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.
You can contact Elizabeth directly by phone at (905) 510-5785
by email at eblair@mortgageedge.ca
or you visit her website at: http://www.missmortgage.ca
Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca
Lic # M08005880
Brokerage Lic # 10680
Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

What is a “closed” or “open” mortgage?

When you are shopping for a mortgage, you may hear the terms, CLOSED or OPEN mortgage.    Let me explain the difference between these two options so you can determine which one is better for you.

OPEN MORTGAGE An “open” mortgage means that the mortgagor (the borrower) can pay the mortgage off, fully, at any time, without a mortgage penalty.   A fully open mortgage is suitable for the following types of borrowers:

a) a property investor buys a property and has intention of selling it in a very short timeframe;

b) a borrower sets up this mortgage because they are expecting a large sum of money (for example, an inheritance or a work bonus) and will use that money to pay off the full mortgage loan amount;

c) a borrower who might be required to move on notice (perhaps due to a work relocation requirement) and would need to pay the mortgage off in full when the house sells.

d) you receive regular large bonus amounts, as an employee of your company, and you wish to apply these amounts to your mortgage anytime without the restrictions that might come on a lender’s regular pre-payment terms.

e)  or perhaps you do not want to be locked into any term, for your mortgage loan.

Note that, the mortgage rates, for fully OPEN mortgages are higher than those given for  “closed” mortgages.   For example, effective today November 24, 2009, a fully open variable mortgage rate, is available at Prime Rate Plus 0.80% = 3.05%

CLOSED MORTGAGE A closed mortgage means that the mortgagor (the borrower) is given a contract “term”.     If the borrower breaks the mortgage, before that contract term is up (known as the renewal date), the borrower must pay the mortgagee (lender) a full three months of interest penalty to get out of the contract (or IRD penalty).    Variable mortgage contract terms are available for 3 year terms and 5 year terms, right now.   A closed variable, 5 year term, mortgage rate is priced right now at between Prime Rate Minus 0.10% = 2.15% up to Prime Rate Plus 0.10% = 2.25%.   A closed variable, 3 year term, mortgage rate is priced at Prime Rate Minus 0.25% = 2.00%.

So you can see that there are specific reasons why a borrower would choose a closed mortgage over an open mortgage.

This post was written by Elizabeth Blair on November 24, 2009, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.  Elizabeth services mortgage clients all over the Greater Toronto Area.

You can contact Elizabeth by phone:  (905) 510-5785

Or email:    eblair@mortgageedge.ca

Visit her website at:     http://www.missmortgage.ca

Elizabeth Blair is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca

Lic # M08005880 / Brokerage Lic # 10680

Head office is located at:     15 Wertheim Court, Suite 210, Richmond Hill, Ontario, L4B 3H7

NEW Lower Mortgage Rates!

Here are hot new mortgage rates for you:

1.     Variable Rate Mortgage at Prime Rate – 2.25% **

2.     5 Year Fixed Rate – 3.75% **

If your mortgage loan amount is greater than $370,000, I can get you

3.59% ** on a 5 Year Fixed Rate.

**  Some conditions apply and subject to approval by the Lender.  Mortgage rates are subject to change without notice.

This post was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.

Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at: http://www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca Lic # M08005880 Brokerage Lic # 10680 Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

HOT News: Lenders slashing variable discounts

Hot news for those who are looking for variable rate mortgages.   Here is the best deal available today:

Prime Rate plus 0.15%.  —> 2.40%

Wow, this is an excellent rate and is only available for mortgage terms of less than 3 years.

You pick a renewal date between March 19, 2012 and May 31, 2012.

This blog post was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.   Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at: http://www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca Lic # M08005880 Brokerage Lic # 10680 Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

What is a bridge loan?

Sometimes when you buy a home, the closing date for the home you are selling does not match the closing date of the house you are buying.   Some of the typical reasons for a difference in closing dates might be:   you want to get some renovations completed on the home being purchased before moving into it or perhaps you could not get the seller to give you the closing date that you really wanted.  So if the closing date of the home you are buying is before the closing date of the home you have sold, you will need a bridge loan.

Let’s use a real example so you can understand how a bridge loan amount is derived:

Price of the home being purchased:     $450,000

Less:     Amount being mortgaged:    $360,000

Less:     Deposit you give to the Realtor:   $10,000

Equals:     $80,000   Bridge Loan amount

The bridge loan amount is really your total down payment, less your deposit because the lender is advancing the rest of the mortgage money on the closing date for the home you are purchasing.

Using the above example, and some real dates, here is how the interest cost is calculated, for this particular bridge loan amount:

Client is buying a new house – closing date = April 30, 2009

Current home is not closing until = June 25, 2009

Clients need a Bridge Loan to cover them for 56 days until current house sells.  Bridge Loan amount required is $80,000.   Lender’s interest rate = *prime rate (2.25%) plus 4%.

Bridge loan  $80,000   X   0.0625 (interest) =  $5,000

$5,000  divided by   365 days =   $13.6986 (per diem cost)

$13.6986   X   56 days =  $767.12

For a Bridge Loan advance that is greater than a certain amount, and is greater than 45 days, the lender will sometimes ask that the bridge loan be secured by way of a collateral mortgage on the property being sold.   If a collateral mortgage is required, lawyers will often charge extra to do this (estimated at $500 and up).  Some lenders will also charge a bridge loan “set-up fee”, and some lenders do not.   Remember also that a property sale must be firm before a lender will arrange a bridge loan for the borrower(s).  And finally, lenders will not advance more than 90% of the value of the property being sold.

This article was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.   Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at: http://www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca Lic # M08005880 Brokerage Lic # 10680 Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

The lost art of referring business

Many good things, unless they are continually practiced and exercised, can truly be “lost”.   I believe that there is an art in the practice of referring business and that too will go by the wayside unless business owners learn to do this well.

Each year, as I work in this business, I continue to build up a database that now holds over 750 people, prospects, clients, lawyers, appraisers, lenders, realtors.  As I continue to see increasing growth in sales, I also see a rising trend in referrals that I receive from others.   This steady stream of referral business has become the main reason why I have enjoyed the growth in sales today.

Over the years, I have also been focused on gathering an established network of individuals who I “believe in”.  Each time I come across someone who might need that kind of service provider, I work very hard to ensure that the individual knows and understands that the person I am referring is excellent at what they do.  In a way, it is a mini sales job, on its own, and most times, the individual I refer ends up getting the business.  Here is an example of some of the things I have done in the past, on behalf of that individual I am referring:  tell them about a recent great job they did for me or a client of mine, let them know that I know them well and I believe wholeheartedly in their service level and I may even send them the business card of the person I am referring.   I can honestly say that I receive great satisfaction in referring others and I believe that if I expect others to refer business to me, then I must be working hard at securing business for them.

I believe that referring others must become something we do everyday IF we expect to reap the reward of constant referred business coming back our way.   It is the basic rule of giving if you expect to receive.   What a straightforward idea but yet so difficult for many to grasp…. truly a lost art.     While there are structured programs and groups out there, like networking groups, that motivate members to refer business, these groups do come with hefty membership fees and often because of the fees, members feel obligated to push leads into the group just to get their fair share of leads back….it is a pay to receive structure.   I believe true networking for referral business should not be something you “pay for”, it should be something you do naturally along with the group of business partners that you have come to know and trust….…sending business leads out and expecting business leads back.

This year has been an absolutely amazing year for me and as I continue to receive leads and pass out a high number of excellent real estate leads to realtors, I will continue to carefully monitor who is sending leads and will ensure those are the ones I refer business back to.

This article was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.

Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at: http://www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca Lic # M08005880 Brokerage Lic # 10680 Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

Mortgage rates on the rise

Recent bond increases is putting extreme pressure on lenders to raise fixed rates.   If you are shopping for a home, or renewing  a mortgage in the next 120-days and you take fixed rate products, now is a good time to negotiate the mortgage rate.

This blog was written by Elizabeth Blair, a licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.

Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at:    http://www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca

Lic # M08005880  /   Brokerage Lic # 10680

mortgage plus line of credit – is it for you?

Home owners who have lots of equity in their house, might be looking for ways to get access to that equity without having to re-finance their house, everytime a need arises.

A mortgage with a line of credit portion is a great product for some.   Here are some typical reasons why you might want to get access to your home equity:   buy investments, stocks, or RRSPs, renovate your home, education costs and more.

The diagram below breaks the mortgage into three parts

	20% cannot be financed
	$ 94,000 MAX Line of Credit portion Variable rate **Prime + 1% **2.25% + 1% = 3.25% Line of credit can be increased up to 80% of the value of the home
	Mortgage balance today $ 210,000 Variable rate 5 year term Or Fixed Rate 2, 3, 4, 5, 7, 9 and 10 year terms 5 yr fixed = 3.69% variable = **2.25% + 0.80% 3.05%

The top portion represents the percentage of your home that cannot be financed and that is 20%.   20% of your home value, must remain as firm equity and cannot be financed.    The next portion down, is your line of credit portion.   The line of credit portion can go up to 80% of the value of the home.   The final portion is your actual mortgage loan portion today, that you decide to convert over, when you move into this product.    I took, for example, a home owner who has a current home with a value of $380,000.     This client also has a mortgage balance right now, with a lender, at $210,000.   By moving into the mortgage + line of credit, the current mortgage amount of $210,000 is set up as either a FIXED mortgage rate, or a VARIABLE rate mortgage.   The borrower can then use up to 80% of the home value at anytime.   So using these numbers above, the home owner can borrow up to an additional $94,000 at anytime.

It is important to mention……. this kind of mortgage product requires a very disciplined borrower as reckless spending or improper investing strategies could have a very negative outcome, a higher debt and possibly the inability to re-pay the debt.

This blog was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.

Elizabeth services mortgage clients in Mississauga

and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at:    http://www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca

Lic # M08005880

Brokerage Lic # 10680

NOTE:    Mortgage rates are effective as of May 17, 2009.   **The variable rate amount can go up or down depending on current posted Prime Rate.  Mortgage rates are subject to change without notice.