We are buying our first home. The bank insists that we add my father as a co-owner of the home in order to qualify for the mortgage amount we need. The entire down payment is coming from our savings and we will be making all the mortgage payments. I would rather not include my father as a co-owner. What are your suggestions?
Guarantor of the mortgage vs. being registered on title as owner
Adding a person who is not going to be living at the property as a co-owner is generally not recommended, unless you are buying an investment property. You should discuss with your bank whether it would be sufficient to have your father as a guarantor on the mortgage, rather than a co-owner. If the bank still insists on your father’s ownership, there are ways to structure the co-ownership in order to protect everyone’s interest and to minimize your father’s exposure to any tax related consequences of owning a second home.
Joint Tenancy and Tenancy in Common
There are two ways in which two or more individuals can own a real property together. They can own it as either joint tenants or tenants in common. The main difference between the two is that people who own a property as joint tenants have a right of survivorship, meaning that if either one of them dies, his or her ownership share passes automatically to the other surviving joint tenants. This is in contrast with tenancy in common, which does not have a right of survivorship, meaning that the share of the deceased tenant in common becomes part of such person’s estate. With tenancy in common you can also specify a size of a share that each co-owner owns. For example, your father can own a 1% share of the home and you and your spouse the remaining 99% share, with all of you owning the home as tenants in common. This will ensure you and your spouse’s share becomes part of your estate rather than transferring to your father in case something happens to both of you.
A lot of people wrestle with the idea of whether they need a real estate Lawyer to handle small real estate transactions. They are unsure if they should hire a real estate law firm Kanata property buyers have hired to help them. The answer is always going to be yes when it comes to hiring a real estate Lawyer to navigate any type of real property transactions.
A good real estate Lawyer is on your side, that means they are looking out for your best interest and will ensure that your interests are protected. Real estate law firms specialize in real property law and deliver the support that you need.
When Do You Need to Consult With a Lawyer?
A lot of times buyers will just let the sellers’ Lawyer manage the real estate transaction, unfortunately, this can be a mistake. Whether you are buying or selling, you want to have your own real estate Lawyer on your side.
You want to be sure that you are getting the support that you need to make an informed decision about your real estate transactions and the only way to do that is by hiring an expert in real estate law. You need a real estate Lawyer when:
- You are buying residential property, commercial property, or land
- You are selling residential property, commercial property, or land
- You are ready to sign a contract for the purchase or sale of property (before you sign)
Having the trusted advice of a real estate law firm Ottawa residents have gotten support from can ensure that you are making informed decisions about your transactions. The ideal time to hire a real estate Lawyer is before you sign the purchase contract.
Knowing exactly what you are agreeing to gives you the power to go into the situation with your eyes wide open. A Lawyer that specializes in real estate will review your contract, provide feedback, and help you negotiate the best deal.
It is important that you have an Lawyer on your side for any type of real estate transaction no matter how small or large. Protecting your interests should be a priority for you and an Lawyer can do that.
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I want to transfer my house to my son. Do we have to pay Land Transfer Tax on such a transfer?
As long as there is no consideration passing between you and your son, and the transfer is a gift to your son, there is no Land Transfer Tax payable.
What is Land Transfer Tax?
Land Transfer Tax is a tax levied by the Ontario government on every transfer of property, subject to some exemptions. The Land Transfer Tax is paid by a person acquiring the property at the time of a transfer. The amount of the Land Transfer Tax is based on consideration passing between a person disposing of property and a person acquiring it. Therefore virtually all purchases of real estate are subject to Land Transfer Tax.
Exemptions to Land Transfer Tax
The Land Transfer Tax is not payable when real estate property being transferred is a gift and there is no consideration passing between the parties. Assumption of an existing mortgage by person acquiring the property or giving a personal loan by person disposing of property to the person acquiring it is a form of consideration and therefore such a transfer would be subject to the Land Transfer Tax.
Transfer of property between married spouses pursuant to a separation agreement is also exempt from the Land Transfer Tax, regardless of the type and amount of consideration passing between the parties. There are some other exemptions under the Land Transfer Tax Act such as transfers involving trusts, transfers to a charity or transfers to a government organization.
First Time Home Buyer’s Rebate
First time home buyers may qualify for a Land Transfer Tax rebate of $2,000 if they have never owned a real estate property anywhere in the world. Further, a spouse of a first time home buyer cannot own any real estate at the time of purchase and must have disposed of previously owned property prior to becoming a spouse of a first time home buyer.
As a first time home buyer you may be eligible to receive a partial refund of the Ontario Land Transfer Tax which is charged on real estate purchases. The First Time Home Buyers’ Tax Credit and the Home Buyers’ Plan are federal programs that provide assistance.
Land Transfer Tax (LTT)
The Land Transfer Tax is paid to Ontario government whenever there is a registered change of ownership of real property. While there are certain exceptions, the land transfer tax is generally payable whenever someone purchases a residential home. The amount of the LTT depends on the purchase price and the current tax rate rises progressively from 0.5% on the first $55,000 of the purchase price to 2% of the amount of purchase price which exceeds $400,000.First time home buyers get a LTT refund up to a maximum of $2,000. To qualify for this refund, you must not have owned a home anywhere in the world in the past and you must use your new home as your primary residence within nine months of the purchase. If you are buying a home together with someone that is not a first time home buyer, you can still receive half of the refund.
First Time Home Buyers’ Tax Credit (HBTC)
The First Time Home Buyers’ Tax Credit is available for the taxation year in which a first home is purchased. The value of this tax credit is $5,000. It can lower a person’s income tax by up to $750.
Home Buyer’s Plan (HBP)
Home buyers can withdraw up to $25,000 from an RRSP if the funds are used towards the purchase of their home. Although there are no immediate tax consequences at the time of withdrawal, the full amount must be repaid to the RRSP within 15 years. To qualify, the Purchaser must not have owned a home in the preceding four years.