Just Know What You’re Getting Into: Tips for First-time Homebuyers


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Published September 29, 2020

(and no, Land Transfer Tax is not a scam)

While a typical right-of-passage of adulthood has traditionally included the first purchase of a home, skyrocketing prices, lack of inventory, bidding wars and income insecurity have made this milestone incredibly challenging for today’s first-time home-buying demographic – arguably more now than any time in the past (especially so if you don’t have any help from the ‘Bank of Mom & Dad’).

Given these mounting costs, we’re finding that an increasing proportion of our residential real estate legal services’ clients are first-time buyers – those who are tech-savvy, well-researched and conscientious of value. We’ve designed the whole intake process to be available 24/7/365, directly through our website and transparent and with personalized written closing costs quotes that detail all cost components. If you’re interested in getting a closing costs’ quote, submit your request directly through our website at any time. Curious? We are confident that the value of our services will soon become apparent.

Here’s a Top 8 Things Every Buyer or Seller Should Know, a helpful resource we created to remind all buyers and sellers of important items pertinent to their upcoming transaction. Check it out! Even if you’re bought & sold before, it’s a handy reminder. Even if you’re bought & sold before, it’s a handy reminder.

One of the most costly components to any purchase transaction is Land Transfer Tax – which is calculated based on the purchase price of the property… and no, this is not a scam made up by lawyers (in actual fact, we are asked this surprisingly frequently). Here’s an online LTT calculator. Note that those purchasing in Toronto have the ‘privilege’ of paying double the amount. Again, that’s not a scam.

First-time homebuyers are eligible for up to $4,000.00 in rebate on the LTT owing on the purchase of their property if they meet the qualifying criteria (same link as above but further down the page). This brings me to what I actually wanted to address today — the second most frequent question we’re asked about LTT rebate eligibility: What if my spouse has bought a home previously but I have not – can I still get the discount on LTT? As ever, the devil here is in the details and it is always best to confirm everything with a lawyer first.

Scenario 1: Generally speaking, if ‘Spouse A’ has not sold their property by the time ‘Spouses A & B’ get married, unfortunately, you, as ‘Spouse B’, lose your eligibility to claim LTT credits. Oh, the joys of marriage! This means that even if ‘Spouse A’ sells their property after you are married (i.e. to afford a new matrimonial home that both spouses buy together), count on full LTT being owed. I recognize that there are many possible permutations and combinations of scenarios and several other factors to consider to confirm LTT rebate eligibility – so always plan to ask your lawyer before drawing up your closing costs budget.

Scenario 2: Conversely, if ‘Spouse A’ sells their property before marriage, ‘Spouse B’ (who has not previously purchased a property anywhere in the world), may be eligible to claim up to 50% (i.e. up to $2,000.00) of their LTT credits on a joint-purchase with ‘Spouse A’. Naturally, since ‘Spouse A’ has already purchased (and since sold) their first property before marriage, they are not eligible for any further LTT rebates. Ever. Again, there are many possible permutations and combinations of scenarios and several other factors to consider to confirm LTT rebate eligibility – so always plan to ask your lawyer before drawing up your closing costs budget.

Tough stuff.

The other cost component we’re asked about frequently is the need for Title Insurance. Again, this is not a scam. And no, the lawyer does not keep that money, either. In fact, Title Insurance (which is again based upon the property’s value) is required by all major financial institutions. It is utilized to protect/preserve the value of the property from any potential title defects which a survey may not reflect. It is our Firm’s opinion that even if there is to be no mortgage on a property purchase (lucky!), all clients ought to have a Title Insurance policy because the potential risk of liability/loss is far outweighs the nominal cost that Title Insurance protection provides.

Oh, the joys of home ownership.

Good luck on your upcoming (first… or next) purchase! Let us know when you’re ready to move forward.

 

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Tristan serves as the Chief Operating Officer of Refcio & Associates Law Firm and as an independent business consultant to clients of the firm.