Buying a home is a significant milestone in life and often a journey filled with excitement and anticipation. While it's easy to get lost in the thrill of choosing the perfect space and designing your dream home, it's important to remember that closing costs are a crucial part of the process.
Closing costs are taken care of at the very end of the home-purchasing journey and they are generally due the week of your possession date or sometimes even the day of. One of the major costs you’ll have to budget for is land transfer tax.
Land transfer tax (LTT) is a fee charged by the province (and at a further municipal level in the City of Toronto) and is calculated based on the total purchase price of the property. This cost must be paid upfront and can be a significant factor in your budget planning.
But fear not, first-time home buyers in Ontario are eligible for rebates of up to $4,000, making this cost a little less daunting.
Depending on which Ontario city you buy in, LTT can significantly impact affordability and add thousands of dollars to your closing costs. Being aware of how much LTT will be owed can help first-time and repeat buyers budget effectively.
To help you navigate the world of LTT, Zoocasa analyzed 35 different markets across Ontario to determine where prospective buyers will pay the most and the least, and how much more it would cost for repeat buyers to purchase a new home without the help of a rebate.
More Expensive Homes Mean More Expensive LTT
The cost of LTT can be a significant factor for first-time home buyers, especially in markets with higher home prices. In Toronto, buyers could pay up to $29,289 in LTT for a home at the current average price of $1,120,362. However, in Sault Ste. Marie and Thunder Bay, first-time buyers can take advantage of the $4,000 rebate, and would not have to pay any LTT as the average LTT for a home is less than the rebate.
Looking at the other end of the spectrum, Sudbury offers the lowest LTT for a home at the average price of $423,400, which comes in at $943. For buyers in markets with home prices below the national average of $686,371, such as London with an average price of $662,892, LTT generally ranges around $6,000 or less.
In most cases, buyers of a home priced below $1,000,000 can expect to pay less than $10,000 in LTT. The lowest-priced city over the $1M mark is Ajax, where an average-priced home of $1,002,020 would have an LTT of $12,515.
The Market Is Less Forgiving For Repeat Buyers
Unfortunately, repeat buyers don't qualify for Ontario's $4,000 first-time homebuyers rebate, meaning they will need to budget for a higher LTT bill on their next home purchase. In Toronto, this increase can be especially significant, as the municipal tax brings the total LTT for a home at the average price to a whopping $37,764. Meanwhile, in Sault Ste. Marie and Thunder Bay, the LTT for repeat buyers will cost around $2,587 and $3,146, respectively. Sudbury remains the only city with an LTT below $5,000 for both first-time and repeat buyers, with an average cost of $4,943.
For buyers purchasing a home over $700,000, they can expect their LTT to hit the $10,000 threshold. Barrie has the lowest home price among cities where repeat buyers will pay over $10,000 in LTT, with an average home price of $725,965 and an LTT cost of $10,994.
LTT can be a significant expense for prospective homebuyers, adding thousands of dollars to their closing costs. It is important to factor in this expense when budgeting for your home purchase, particularly in highly competitive real estate markets where prices are on the rise due to limited supply.