The Ontario government has just made the pot a little sweeter for first-time homebuyers.
As of the start of 2017, new homebuyers will receive twice the amount of refunded money for purchasing a home than first-time buyers did in previous years. The maximum Land Transfer Tax (LTT) refund will be doubled to $4,000. Changes have also been made to the LTT rates for each housing price bracket.
To put it bluntly: if you are planning on buying a home in Ontario, it just got a lot more affordable.
Why You Should Care About the Land Transfer Tax
To really understand why the increase in the refund is so important, it is helpful to get acquainted with the old Ontario Land Transfer Tax Rates and how the new rates make home buying more affordable.
Here’s how it all breaks down:
|OLD ONTARIO LTT RATES Per Price Range||NEW ONTARIO LTT RATES Per Price Range|
|Up to $55,000 = 0.5%||Up to $55,000 = 0.5%|
|$55,000 to $250,000 = 1.0%||$55,000 to $250,000 = 1.0%|
|$250,000 to $400,000 = 1.5%||$250,000 to $400,000 = 1.5%|
|Above $400,000 = 2.0%||$400,000 to $2-million = 2.0%|
|Above $2 million = 2.5%|
The new rates are more representative of the current housing market, which makes sense since this is the first update we have seen to these rates since the late ’80s. Apply the doubled refund to the new LTT and starting this year, we will have new homebuyers effectively losing zero dollars to the LTT on the first few hundred thousand dollars on the purchase price of their new homes.
What Is the Refund Increase All About?
So many young families around the GTA are stuck renting or living with relatives because they cannot afford to buy homes in the current market. The refund ensures first-time homebuyers will be able to break into inflated real estate markets like Toronto and the GTA.
The inflation we are currently experiencing in the Toronto real estate market is localized for the most part. Other parts of Ontario have not been experiencing the dramatic jump in pricing. This rebate is a way to even the playing field a bit and offers new homebuyers a rather nice incentive. In Ontario Finance Minister Charles Sousa’s, own words: “With the doubled refund, more than half of first-time homebuyers in Ontario would pay no LTT on the purchase of their first home.”
Incorporating the Refund into Your Buying Plan
Even with the raised LTT refund, creating a sound financial plan for purchasing a first home is vital to success. When creating a plan, make sure the terms fit the parameters of your lifestyle. The LLT refund will ease the financial burden significantly, but budgeting for down payments and mortgage payments are still issues that must be considered. It does not have to be complicated. It can be as basic as a simple chart of money in versus money out. But, when creating your budget be brutally honest with yourself about your spending habits to ensure your financial plan is actionable.
With the updates to the LTT, buying in the GTA is far more attainable. Do not wait to take advantage of this update. The changes to the LTT and the LTT refund are in effect as of January 1, 2017.
Land Transfer Tax- http://www.fin.gov.on.ca/en/tax/ltt/
LTT Refund for First Time Homebuyers- http://www.fin.gov.on.ca/en/bulletins/ltt/1_2008.html