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.

Buying a home, renting it all out, or just a portion of it

Buying a home, renting it all out, or just a portion of it

I have run into this question a few times, over the years, and decided that I should sit down and write about it.   When you purchase a home, as the mortgagor, you will come across some questions around whether the home you are buying is going to be your primary residence (you will be living there yourself) OR whether you have intentions of renting out ANY portion of the house.

1.  Is this your primary residence?

This question will be asked of you, at the mortgage application stage.  It is important to specify exactly what your intentions are with this new home you are buying.  If you are planning on renting out the home, you must state this.  Your answer will determine how your mortgage application is underwritten.  If you purchase a home and it will be your primary residence, you may purchase a home in Canada with a minimum down payment of 5%.  However, if you purchase a home and have intentions of renting it out, your down payment must now be 20% per Department of Finance new borrowing guidelines introduced on April 19, 2010.

The question will also be asked of you, at the lawyer’s office.  The lawyer will require you to sign a legal affidavit stating that this is your primary residence and it is not intended for use as a rental property.  If the client even hints that they will be renting out any portion of the house, the lawyer cannot and should not commission the affidavit.

2.  Is ANY PORTION of the house to be rented out?

This statement will appear in your mortgage commitment and applies if this is your primary residence.  You may be wondering why would it be a concern to my lender if I decide to just rent out a PORTION of my house?

Here is likely the most apparent reason why a lender would not allow this.  Should the mortgage go into default, how quickly can they (the lender) get a tenant out of the house, as opposed to the owner?  At one time, when someone was about to go into default, they might immediately sign a lease with a friend and then the mortgagee would have to go through a cumbersome process to evict them.   While it is now easier to evict a tenant, there is always concern about delays that might occur getting a tenant out.  Also, it is important to mention, that since the tenant does not own the home, they may not take the same care of the property, that an owner would.

In summary, some very important things to consider:

If you purchase a home, and you have indicated that it is your primary residence, the lawyer is instructed, by the lender, to prepare a legal affidavit stating that this is your primary residence and that you do not have intentions of renting out the home.   Remember that if the borrower even hints that they will be renting out any portion of the house, the lawyer CANNOT commission the affidavit.

Also remember that if this is your primary residence you should not even rent out a PORTION of your home UNLESS you have notified your lender.  If your lender finds out, EVEN IF you are not in default on any other provision, there will most certainly be a default coming if you do not disclose the new rental arrangement and the lender finds out.  You may be thinking, well how can the lender find out…….easier than you think.    A disgruntled neighbor, family member, or even worse, your tenant!  I recently met a mortgage applicant who shared their intention of reporting their current landlord for renting out an illegal basement apartment to them as a way of retaliating for raising the rent!   So a word of caution if you are thinking of doing this or even are in this situation now…..lenders can find out.

Be absolutely sure to disclose up front, to the bank, or your broker, exactly what your intentions are with the property at the time you are planning to buy, OR, if you make any changes to your plans after you move in.

This blog post was written by Elizabeth Blair on June 24, 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 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.

Fed up with telemarketing calls!

Fed up with telemarketing calls so I finally did it…….. I picked up the phone and called the CRTC to make a complaint about an unsolicited telemarketing fax I received last night on my fax machine. A telecom company decided to fax me one of their marketing ads which annoyed me.

A few years ago, the CRTC (Canadian Radio Television and Telecommunications Commission) set up the “National Do-not-call Registry” in Canada which is an online tool where individuals can register their telephone numbers on this registry. This tool became available after Canadian Government passed Bill C-37 and it became law empowering CRTC to issue fines on those who violated the do-not-call rules. I remember when I first heard about this tool, I pounced on the opportunity immediately to register my numbers.

Once listed on the registry, a telemarketer should not contact you to solicit your business or money. Now there are some exceptions on those who can call you and these are charities, newspapers, political parties seeking your support, or a business where you already have had recent consumer transactions. Once you register your telephone number, it takes 31-days, after you register your telephone number, and after the 31-day period, telemarketing companies, other than those listed above, cannot call your number and if they do, they can face fines if you register a valid complaint. Note that the registration of your telephone number is only valid for three years, so after three years, you should call the National do not call registry to re-register your phone number.

To register your number on the registry in Canada, go to this website:

https://www.lnnte-dncl.gc.ca/index-eng

So the process was easy. I called 1-866-580-3625 begin_of_the_skype_highlighting              1-866-580-3625      end_of_the_skype_highlighting begin_of_the_skype_highlighting 1-866-580-3625 begin_of_the_skype_highlighting              1-866-580-3625      end_of_the_skype_highlighting end_of_the_skype_highlighting and spoke to a very helpful lady, who asked me a few questions:

1) what number did the telemarketer call me at?

2) what is the name of the business, and the phone number of the business that called me?

3) what was the date that the telemarketer contacted me?

And, to top it all off….I received a faxed document – perfect printed “evidence” !!!

She then gave me a unique ID code number, which I was to write across the fax transmission I received, and then she asked me to fax that document I received to this number: 1-888-362-5329 begin_of_the_skype_highlighting              1-888-362-5329      end_of_the_skype_highlighting begin_of_the_skype_highlighting 1-888-362-5329 begin_of_the_skype_highlighting              1-888-362-5329      end_of_the_skype_highlighting end_of_the_skype_highlighting. She then advised me that any future calls or faxes I received from telemarketers, must be called in and registered separately as they assign a unique ID code to each call or fax……….. Easy!

We have family, in the United States, and we were told that the Federal Communications Commission (FCC) Do Not Call Registry, has hefty penalties for telemarketers who do not comply. I found a good example of that — AT&T was fined $780,000 for failing to comply with the Do Not Call Registry. Wow, $780,000!!!……don’t mess with the US or at least don’t mess with the US FCC!! Here is a link to the article – I’m not sure if the fine was ever collected, but I hope it was.

http://www.allbusiness.com/legal/consumer-law-telemarketing-regulation-do-not/10221784-1.html

Somehow the CRTC in Canada is just a little weak in the area of imposing penalties to telemarketers who call those who have registered their numbers with the do-not-call list. Canadian companies, who still wish to bother us with their telemarketing calls, have found ways to get around the rules by outsourcing their telemarketing calls to overseas companies…..now that I have followed through on the complaint process, I will be sure to ask some questions to find out who the Canadian company is and what their local number is, so that I can follow through with a formal complaint.

The CRTC in Canada has, what I would consider, “wimpy” penalties especially since consumers need assurance that offending companies really do get the message and avoid calling those who do not wish to be called.   For example, in Canada, if found guilty, an individual can be fined $1,500 whereas a corporation can be fined up to $15,000 for each violation.   It seems the number of fines issued is also very minimal relative to the actual number of reported telemarketers in violation – see this link:

http://www.crtc.gc.ca/eng/dncl/status-etape.htm

Sorry fellow sales friends, but I’m going to have to tell you that its not the way we should be getting business anymore.  Too many people are just simply fed up with telemarketing calls.

© 2010 This blog was written by Elizabeth Blair at Mortgage Edge on March 23, 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 begin_of_the_skype_highlighting              (905) 510-5785      end_of_the_skype_highlighting begin_of_the_skype_highlighting (905) 510-5785 begin_of_the_skype_highlighting              (905) 510-5785      end_of_the_skype_highlighting end_of_the_skype_highlighting 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.

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.

Fixed Mortgage Rates moving up

The bond is up by more than 22 points in the last few days.  We have already seen some movement at the bank level, and expect to see movement early next week if the bond stays where it is at – see links below.

Are you pressed for time and with fixed rates rising, please call me today to find out about locking in a rate for 120 days.     It only takes 2 minutes (time is guaranteed) to request a Rate Hold*.

* ”Rate Hold”:    this is not a mortgage pre-approval application.   On applicant’s request to proceed, with the rate hold offer, all applicants are required to complete a mortgage application.  The lender reserves the right to either accept or decline, any applicant, based on their review of the applicant(s) submitted mortgage application(s).  This review involves the verification of personal credit report history and verification of income.

See link:  http://www.stockwatch.com/newsit/newsit_newsit.aspx?bid=Z-C:RY-1650239&symbol=RY&news_region=C

See link:  http://www.tmxmoney.com/HttpController?GetPage=BondsAndRates&Language=en

This blog post was written by Elizabeth Blair on October 12, 2009.  Elizabeth Blair 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 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.

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.

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

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.