Register with Evanston
to recieve the latest Evanston updates.
Search Our Site
Register with Evanston
to recieve the latest Evanston updates.
August 28, 2018 | by QualicoCommunities
Buying a home is an exciting experience that signals the beginning of a new chapter in your personal journey of home ownership. The transaction of buying a new home comes with many different taxes and expenditures; some of which are unknown to homebuyers until the time of purchase.
One of those taxes or expenditures is land transfer tax. Often recognized as a hidden cost in the buying process, land transfer taxes are actually an important fee to consider before you buy. When you buy a house, condo or parcel of land in Calgary, you are subject to a land transfer tax that is due upon closing of your home. This tax is paid to the provincial government and is based on the amount paid for the land in addition to the amount remaining on any mortgage or debt assumed as part of the arrangement to buy the land.
In most provinces throughout Canada, land transfer taxes are based on a percentage of the home’s value on a sliding scale. In some major Canadian cities, this can amount to over $20,000! In Alberta, however, it is done a little bit differently and the process has proven to be more beneficial to homebuyers.
When you buy a home in Alberta, instead of being charged a percentage of the home’s value, you are assessed a $50 base fee plus $1 for every $5,000 of property value or mortgage amount. This means there are two calculations applied to determine your land transfer tax: one based on the value of the home, and a second based on the amount being mortgaged.
In order to have a better understanding of how this works, here is a great example to make sense of it.
Let’s imagine you purchased a new home with a value of $300,000. The first calculation is based on the value of your home. This equation is a base rate of $50 plus $1 for every $5,000 of property value. This amounts to another $60 ($300,000/$5,000). Therefore the property value half of your land transfer tax would amount to $110.
The second half of your calculation is based on your mortgage amount. Let’s imagine you put a downpayment of 25% ($75,000) towards your new home. This leaves you with a $225,000 mortgage. Much like the property value portion, the equation for this half is a base rate of $50 pus $1 for every $5,000 of mortgage value. In the case of this example, that would amount to another $45 ($225,000/$5,000). That means the second half of the land transfer cost would be $95 and in total, your land transfer taxes would cost you $205.
This calculation allows Alberta to have some of the least expensive land transfer taxes across all of Canada; a huge benefit to buyers in the province. Other provinces also offer a rebate with land transfer fees based on the high price. Alberta is the lone province without a rebate, largely due to the very low rate.
It is important when buying a home you are armed with as much knowledge as you can be, and are aware of any and all costs that be accrued.
Land transfer taxes are a necessary part of buying your new home. They are the cost of transferring ownership of your new home from one person or company to another. Luckily, buying your new home in Alberta means that you don’t have to worry about this often surprising cost breaking the bank.
StreetSide Developments has been building homes for over 28 years. We have the honour of constructing the place in the world where our owners feel most like themselves. It’s why we build one way, and one way only — to the highest level of quality, because we aren’t just building homes, we’re building your home.