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.

Changes to Insured Stated Income programs

Borrowing Guidelines for Insured Stated Income Programs in Canada are about to change

The borrowing guidelines for insured Stated Income Programs are about to undergo some major changes and these changes will be implemented effective April 9, 2010.

The changes are being announced by CMHC (also known as Canada Mortgage and Housing Corporation).    CMHC’s changes, as well as those announced by Finance Minister Jim Flaherty effective on April 19, 2010 are all attempts to help cool off the heated housing market which is now being driven by record-low interest rates.   More importantly, these new measures are required to protect borrowers from taking on more debt than they can afford especially as interest rate hikes are imminent.  While Canada still allows Stated Income programs here, they are becoming very rare in the U.S.  The massive number of defaults and foreclosures reported by the U.S. after the 2008 credit crisis were attributed mostly to Stated Income programs that were used to place under-qualified borrowers into mortgage loans that they could not afford.

While Canadian lenders continue to use the Stated Income programs here, customized for commissioned and self-employed borrowers, CMHC will now be scrutinizing those same applications using tighter underwriting criteria making the CMHC Self-Employed mortgage insurance program a little harder to access.

What exactly does Stated Income mean?

Stated Income means exactly that.   When a mortgage application is created, for a self-employed or commissioned applicant, and the entire income amount is not verifiable in traditional documents, for example a Notice of Assessment, the applicant may apply under the Stated Income program to allow an income adjustment to help qualify them for a home purchase or re-finance.   A real example might look something like this:

Mr.Thomas works as a Systems Analyst in Toronto.  He is purchasing a house based on his earnings alone as his wife is currently not working.  He earns $77,000 gross annually and his employment status is considered self-employed as he works as an independent contractor and bills the company directly for his time.  He is not on payroll.  He has worked in various departments for this same government organization, as a Systems Analyst, for the last two years.   To buy the home they want, this couple would need an income of $85,000 to qualify for the purchase.   On a traditional mortgage application, the couple would be declined and would not be able to purchase the home.   However, by utilizing the Stated Income program, the couple can qualify to buy this home with a 5% down payment and the income placed on the application would be “stated” on the application at a higher amount.  The couple has no other savings or funds available to them.  The income to qualify the applicants, would be entered at the amount of $85,000 instead of his actual income of $77,000, in order to qualify the buyers.

Here is an outline of the changes that will be implemented on any applications called Stated Income applications which pass through CMHC as an “insured” mortgage AFTER April 9, 2010 and how these changes would affect the particular applicants described above:

1.   Downpayment:  those who are purchasing a home, and who have applications classified as a Stated Income application, will be required to put down 10% rather than the 5% minimum required today.

Mr.Thomas and his wife, after April 9, 2010 must have a down payment equal to 10% of the purchase price, along with enough funds to cover closing costs.

2.  Tenure:   those who have been working in the same business for greater than three years, would not be eligible for the Stated Income program and therefore those in this category would have to provide proof of their income, for example, a Notice of Assessment.

Because Mr.Thomas had only been working as a Systems Analyst for the past two years in total, they could still apply under the Stated Income program and be eligible.   Had Mr.Thomas been working three years and 6 months, as a Systems Analyst, they could not qualify for the home they wanted.

3.  Documents:    documents will be requested and viewed by the lender to help determine the length of self-employed which are not always requested today.   The documents a lender may ask for:    a business license, proof of GST registration, articles of incorporation (if incorporated).

4.  Commission:     those who are collecting commission would no longer be eligible for the Self-Employed program.

Mr.Thomas is not paid on a commission basis, therefore, after April 9, 2010, he could still utilize the Stated Income program.

5.  Limits:   a re-finance will be limited to 85% loan-to-value instead of the current limit of 90% used today.

If Mr.Thomas decides to re-finance his home, in the coming years, while he is within the insured status range and assuming self-employed income is still their primary income, they will only be able to re-finance up to 85% of the value of their property.

It is important to mention that these program changes only affect those mortgages that are “insured” by the lender therefore, those mortgages that are not insured, could be reviewed differently from lender to lender and each lender would specify their underwriting criteria on a case-by-case basis.

© 2010 This article was written by Elizabeth Blair at Mortgage Edge on March 11, 2010. Elizabeth Blair services mortgage clients primarily 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: Park Place Corporate Centre, 15 Wertheim Court, Suite 210, Richmond Hill, ON, L4B 3H7, Canada.

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.

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.

Financing: bank or broker?

Are you still undecided on whether you should deal with a bank or a mortgage broker?  Here is a short summary of what some compelling truths are, around this subject.

A mortgage broker acts as a MEDIATOR or a representative between the borrower and the bank.

Here are some straight-forward questions to consider:

a) what if something goes wrong?

b) who will represent you?

c) will you be able to navigate through escalation channels to get something done?

d) will you be able to successfully negotiate what you want on your own?

e) what if the lender says no?

f) how easy will it be for you to get the deal you want from another bank and on your own?

You may be asking, so how does a broker mediate between the borrower and the bank?

If for example, an office has 50 representatives, who are actively carrying on in the business of dealing in mortgages.  Lets say that each representative has placed 2 million dollars of mortgage business with a particular lender.  The brokerage now has a combined volume of 100 million dollars of business with that particular lender.  Now that kind of business volume will make anyone sit up and pay attention, agree? So essentially the high volume of mortgage business, that a brokerage has, for a lender, will automatically secure some real benefits for the person looking for financing:

1) the lender may now pass along additional mortgage rate discounts to those brokerages who have reached a particular sales volume;

2) a large brokerage will immediately receive dedicated focus and attention from individual lenders, for example, dedicated underwriters.  A dedicated underwriter means that a submitted mortgage deal is reviewed quickly and this is essential to maintain the service level to the demands of a busy brokerage.   For the borrower, this means that a difficult situation can be escalated quickly to senior management and issues can be reviewed and approved that an individual may not easily accomplish on their own.

This blog was written by Elizabeth Blair, a licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.  Elizabeth services mortgage clients primarily 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::   15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

Look out Ontario: more taxes are coming your way

Is the bad news about our economy, the slumping housing industry, and more lost jobs enough to have you down and out?   Wait there is more bad news heading your way.   Yes the poor, beat-up and overtaxed Canadian family, living in Ontario, is about to face more taxes.   Primarily, the tax is directed at the housing industry so if you plan to buy a newly constructed home, or sell your home, you will be facing this new tax in Ontario.

Announced on March 26, 2009, the Ontario Liberal Government, Dalton McGuinty, is fine-tuning their annual provincial budget which is scheduled to take effect on July 1, 2010.   The new budget is going to merge the current 8% PST and 5% GST, into a new “harmonized” tax.  If you think that is a harmless undertaking, have a close look at some of the housing-related services that will now be taxed:

Buyers who purchase a newly constructed home, after July 1, 2010, where the value is greater than $400,000, will be required to pay a 13% tax. For example, if you purchased a house for $500,000, the additional tax, added into the mix, would stick you with a $65,000 tax.  It is important to mention, that this harmonized tax would NOT apply to re-sale homes.  This has Ontario home builders especially worried as they are already dealing with excess inventory now and current deterioration of prices. With the introduction of this tax, newly-built, higher-priced homes, from builders, will be very difficult to sell.

If you are planning to sell your home, after July 1, 2010, you would be required to pay a 13% blended tax rate.  The new 13% tax rate will replace the current 5% GST calculated on a realtor’s commission. Here below is an example of what a $400,000 sale price might look like, comparing today’s 5% GST and the coming 13% blended tax. This 13% tax will apply on the service, regardless of the sale price of your home. The tax will be charged, whether you utilize the services of a professional real estate agent or a discount service provider. Realtors, no doubt, will be facing disgruntled sellers who will push even harder to negotiate the commission down because of the new added costs a seller will face: a higher tax, a lower home value and less cash room for sellers to maneuver.   The 13% tax will be a big burden especially since real estate values are predicted to face challenges right into 2010, when the new tax is introduced.

Sale Price of the Home = $400,000
Now			After July 1, 2010
Real Estate Fees			Real Estate Fees
5% to Realtor	$20,000		5% to Realtor	$20,000
5% GST	$1,000		13% harmonized tax	$2,600
Total Selling Cost	$21,000		Total Selling Cost	$22,600

The list of affected services, does not stop there.    The following, in the housing and services industry, will also be required to top up their invoice with this new 13% tax:

– legal services

– home inspection services

– landscaping

– renovation services

– land survey services;and there are others too.

Of course the Ontario Government is really beginning to lick their lips with glee, as this new tax is estimated to bring in over $300 MILLION in tax revenues, and the revenues are only estimated for the closing of home sales alone.  With a surging deficit, the Ontario government is going straight into our pockets for help.  Many in Ontario are unhappy about the proposal but like most legislation in Ontario, it is passed without the strong-arm to stop it.

For me, as an Ontario resident, a move to the province of Alberta sounds really tempting right now, especially since our friends out west do not pay any provincial sales tax!

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

3.99% on a 5-year fixed rate!

Effective March 19, 2009, I can obtain  3.99% on a 5-year fixed rate from a top Canadian mortgage lender.

Rates are looking great and buyers are feeling great about this mortgage market.

This notice 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.