Anyone purchasing a home will need to budget for the taxes involved. The taxes cannot be rolled into the mortgage, so the purchaser will need to have them set aside.

GST and Home Purchase
GST is only charged on new homes and not on resale properties. The government offers a GST rebate; the lower the price of the home, the greater the percentage of the rebate. There is no rebate on luxury homes (at this point, the median home price in some Canadian real estate markets is above the federal government’s cutoff for a GST rebate). The person selling the home is responsible for paying GST on the service fees of the realtors involved in the transaction.

Land and Property Transfer Taxes
Each province and territory has a different policy on transfer of ownership taxes, ranging from .5% to 3%. A transfer tax of 1.5% on a home costing $200,000 would amount to $3,000—cash that the purchaser must have on hand on the day that ownership is transferred.

Property Taxes
In most cases, the previous owner of a property will have paid the municipal property taxes for the year. When the title deed is transferred to the new owner, he or she will have to pay the previous owner the remaining portion of the property taxes. For example, if the annual property taxes are $2,400 and the title changes 2/3 of the way through the year, the new owner will have to pay back $800 to the seller.

Other Home Purchase Tax Issues
For the most part, the interest paid on home mortgages is not tax deductible. But when home equity is used for investment purposes it is possible to deduct mortgage interest. Also, different municipalities, provinces, and federal programs offer tax rebates depending on various criteria. Consult with an Ottawa mortgages specialist or tax lawyer for information on tax break programs and grants specific to Ottawa.

If you have additional questions or would like to see if you can prequalify for a mortgage in Ottawa, please call Chad Robinson at (613) 288-5836 or use our Ottawa Mortgages Directory to find a mortgage broker or mortgage bank specialist to help you.