Canadian Personal Finance Blog

TL:DR So I accidentally hit the wrong button and republished this. I wrote it about 10 years ago, but it is still true. Land Transfer taxes are an expense many folks forget about, don’t.

The Land Transfer Tax is one of those interesting pains in the rear in parts of Ontario.

It bites you when you are thinking about buying a house or property. Luckily when I bought my first house, I didn’t have to pay the land transfer tax. I used an Ontario Home Owner Savings Plan (along since gone program). The main feature (for 1st home buyers only) was not having to pay the Land Transfer Tax. This forgiving of the Land Transfer Tax on first homes has been replaced by the  Land Transfer Tax Refund for First-time Homebuyers (please read that carefully).

Unfortunately the second house I bought I had to fork out my land transfer tax, and I grumbled a great deal about it. This cost is one of those forgotten costs that is rarely mentioned, until closing costs are discussed. The danger is you might buy less house if you thought about it as part of your purchasing price, but you should think about it before you make an offer on a house.

Land Transfer Tax Calculation

From an Ontario Government page, the tax is calculated in the following way:

The tax rates on the value of the consideration are as follows:

Prices up to and including $55,000 -0.5 %

Amounts exceeding $55,000 up to and including $250,000 - 1.0 %

Prices exceeding $250,000 - 1.5 %

Amounts exceeding $400,000 where the land contains one or two single family residences – 2.0 %

For the definition of “single family residence,” as defined in subsection 1(1) of the Act please see the end of this bulletin or the Act.

On the basis of that simple formula for residential properties, you could put this in your Excel-like spreadsheet and get the right answer (based on the calculation proposed on the government web page):

=IF(B4<=55000,(B4*0.005),IF(B4<=250000,((B4*0.01)-275),IF(B4<=400000,((B4*0.015)-1525),((B4*0.02)-3525 ))))

Where the B4 cell holds the actual selling price of the residential property. An example output might be:

Easy enough to figure out, but don’t forget it is there! If you are buying a  $1/2 Million dollar house $6475 may seem like chump change, and if you think so, please stroke me a cheque for that amount, and see how it feels then.

I received the following email graphic from Starbucks today. I thought, hey that’s a good idea, but then I remembered something from 2015.

A while back, I was the victim of a scam using this system. Starbucks’ customer list had been breached. Using that information, bogus Loyalty Cards were created.

The scam is well described in the graphic below. This outlines the importance of not turning on Automatic Reloads on any card like the Starbucks Reward Card.

It is important to audit your automatic bill payments as well.

The graphic shows how simple it is to start up a quick scam. I only clued in when my phone had many messages about the auto-reloads happening.

Things to take from this

1. If you use your Credit Card to “refill” your Loyalty card, do not allow auto-reload.
2. Turn on messaging, for the system to tell you when things happen. This will at least warn you about all activity.
3. If you hear that your loyalty system has been hacked, change your card and log ins, right away. Do not assume it will not happen to you.
4. Are the points that important? What is the risk to reward giving out your credit card for this reward?

Glad I wrote about this a while ago, or I might have done something silly.

I received the good news is that I have EquiFax for long period of time to check my credit bureau status. The better news is it is Free. The really bad news is the reason why. I was part of the Desjardins data-breach so now I am being “compensated” for this by getting Free Equifax.

Previously, I had access due to Home Depot having a data-breach. Surprisingly, my account with Equifax still existed (with the same password?). My access was granted for a long period of time, and I did notice a few things when I logged in.

1. My first name is still incorrectly written in my report. This mis-spelling makes me wonder how accurate this report is. I tried to have it changed a while ago, but it never happened.
2. I have a lot of Desjardins credit vehicles on my report. Makes me think someone DID create them and was simply waiting to use them? Will try to cancel all of those.
3. A very large credit vehicle that should be on my report is not. That is interesting as well.

I am glad to see I have such an excellent Credit Rating, but it means nothing to me. It is most likely inaccurate, and unless I plan on buying another house I don’t really need it. The other danger is that given my Personal Info is compromised, any perpetrator could get away with a lot of money fraudulently.

Epilogue

Interesting that 57% of Canadians have Excellent Credit Ratings? That seems a little skewed, in terms of a data set. Either that or the actual term “excellent” has little or no meaning?

Related Topics

Free is a good price for things, however, things are rarely without some cost associated with them. This is how I got free EquiFax, the first time!

I have come up with a relatively straight forward heuristic on how to figure this one out.

heu·ris·tic adjective
enabling a person to discover or learn something for themselves.”a “hands-on” or interactive heuristic approach to learning”

Google Dictionary description

It is a simple trickle down or waterfall decision tree. Many times I get asked this question, or see it float by in other sites.

Where to Put Money Heuristic

1. Pay off debt , it has the highest guaranteed pay back today.
   
   I mean all debt except perhaps your mortgage. A mortgage is your biggest debt, so my view is investing elsewhere, and not paying down your mortgage is a mistake. I have been told my opinion is very “old fashioned”.
   • This lowers your risk in life and gives you choices.
     
2. Put money in your TFSA.
   
   My opinion is that this is a good place to put your money. How you invest it, is up to you. It should be within your Risk tolerances. Whether you want to buy stocks, Index Funds, ETFs or mutual funds is up to you. Do this in a trading account. In a trading account you can buy all those savings vehicles. In a Mutual Fund account, you usually can only buy Bank or Insurance company (read high MER) funds.
   
   TFSA until you reach your limit. You find that in your My CRA Account (limit as of start of current year).
   
3. Do you have Kids? If you do, maybe it is time to think about an RESP? This could be, before (2). The Registered Education Savings Plan will help your child’s future. You may decide you don’t want to do this, so you could skip this step.
   
4. Do you have a disabled loved one? Before step (1) you might want to think about an RDSP. A Registered Disability Savings Plan will help their future a great deal.
   
5. Time to use your RRSP. It will lower your tax levels, so you should reinvest the money you get back into the RRSP, until you have no RRSP limit left.
   
   Sometimes you can’t use your RRSP, if you are lucky enough to have a Pension. This is a tragedy of riches, so don’t complain to your friends about it, or they might kick you in the shins.
   
6. You have reached savings nirvana. If you are at this point where:
   • All your debt is paid off
   • Your TFSA limit is reached
   • Your RRSP is full
     You are now at the Zen level of life.

At this point in your life you have choices that most folks don’t have. Your Risk level should be quite low. Your stress level (due to money) should be non-existent.

This is your goal. Being out of debt, with money in the bank means you are financially in the right place. You can do what you want.

Am I Done ?

If you somehow get back into debt, restart the process. You did it once, you can do it again. Maybe create (say after step (1)) an Emergency Fund, in case something bad happens.

Is this easy? No, however, it is a good heuristic.