First-time buyer land transfer tax rebate increasing to $4,000
By Lucas on Nov 15, 2016
The Ontario Real Estate Association (OREA) just announced that first-time buyers will soon receive a bigger and better land transfer tax rebate!
In the 2016 Fall Economic Statement, the Government of Ontario announced that the Land Transfer Tax rebate is increasing from $2,000 to $4,000. This will significantly decrease the closing costs for first-time buyers.
“Homeownership changes you for the better,” says OREA CEO Designate, Tim Hudak. “It builds strong communities and stable neighbourhoods. A tax break for first-time buyers will give a lot of young families the leg up they need to get into homeownership.”
Here’s an example to show you the savings: If you were to purchase a condo unit for $367,990, then you would owe approximately $3,994 in Ontario Land Transfer Tax. The first-time buyer rebate was saving you $2,000, so you were still paying around $1,994 at the time of closing. With the increased rebate, you wouldn’t pay any Ontario Land Transfer Tax at all for a unit of this price.
It’s important to note that Toronto has its own Land Transfer Tax in addition to the provincial tax. For a unit priced at $367,990, you would pay more than $3,400 in Toronto Land Transfer Tax. First-time buyers already receive a rebate of $3,725 for the Toronto tax. Basically, if you’re a first-time buyer and purchasing a home in Toronto that’s less than $400,000, you’ll receive a full rebate (of the Toronto tax).
“Premier Wynne and Minister Sousa deserve credit for taking positive steps to address affordability,” says Hudak. “It’s encouraging news for that young couple looking to get into the market. We look forward to continuing to work with the government to improve affordability by looking at other issues impacting prices, like supply.”
According to Altus Group Economics, the improved rebate will create 5,000 jobs and $268 million in economic spinoffs. The OREA release also goes on to say that homeownership is proven to contribute to family happiness and health.
"Finding an affordable home has become a struggle for thousands of young couples,” says Ray Ferris, president of OREA. “This tax break will reduce a first-time buyer’s closing costs and help them save more for their down payment.”
Many first-time buyers struggle to save for a down payment; they struggle so much that they often forget about or neglect the closing costs. To stay on the safe side, you should have about 3% of the purchase price saved for closings costs. If you’re buying preconstruction, then there will be some additional closings costs, so saving 7%-8% would be wise.
This is great news, but it is still only a small step towards making real estate affordable for first-time buyers. Last month, new mortgage rules were announced, weakening the borrowing power of anyone who needs an insured mortgage. All mortgages need to be insured if less than 20% is put down, and we’ve already discussed how coming up with the down payment is one of the biggest hurdles for first-timers.
Saving an extra $2,000 at closing is nothing to scoff at - every dollar counts for young people trying to get into the market - but hopefully the government and the industry continue to come up with new measures that help families buy their first home.
