Savvy home buyers know that when they're looking at Markham houses for sale, the price they'll end up paying will be higher than the one in the listing, even if they manage to bargain the seller down. This is because experienced buyers recognize the importance of factoring in the closing costs into their budget for their new home. You too can be a savvy buyer, even if this is your first home purchase, by taking these factors into account. Land transfer tax is one of them, and we'll show you how to take it into consideration.
If you've never bought a home before, whether it's Etobicoke real estate or a cottage in PEI, you probably never thought about how the government makes money on property sales. But they do. The same way that they make money off of your purchase of toilet paper or video games. By charging a tax on the item you purchased. In the case of your home, it's called a land transfer tax instead of a sale tax and it must be paid when you go to change the name on the official property registry.
One thing you need to remember is that municipalities generate almost all of their money from land taxes, so in addition to the provincial land transfer tax, you'll have to pay an additional tax to your municipality, which, in the case of buying real estate in Vaughan, is the city of Toronto. When you buy one of those new condos in Toronto, a corporation called Teranet is authorized to collect it from you through your real estate lawyer, so you can get both out of the way at once.
The tax you will be charged by the city of Toronto is based on how much the property is worth according to what you paid for it, not according to an independent valuation from an assessor, so keep in mind that a crooked bookkeeper in Toronto could commit fraud this way. For single family homes, the transfer tax is .5% up to $55,000, 1% between $55,000 and $400,000, and 2% over $400,000. You can use the transfer tax calculator on the Toronto Real Estate Board website to guesstimate the tax on the home you're going to buy.
Don't forget about the provincial portion, though, or you might end up needing a second mortgage in Toronto. The rates are the same as for Toronto, except that the 1% tier is capped at $250,000 and there is an additional tier of 1.5% between $250,000 and $400,000. In both cases, buyers who are purchasing their first home are entitled to a transfer tax rebate of $2,000 for the provincial portion and $3,725 for the municipal portion.
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