There are several names for it, Property Transfer Tax, Land Transfer Tax, Property Purchase Tax, but, unfortunately, they all add up to the same and that is an additional expense when purchasing a home. And if nobody tells you about this tax or additional closing costs you could end up very surprised and/or not have enough money to complete on the purchase of your new home.
The Property Transfer Tax is applicable in most provinces within Canada however you can be exempt from this tax. If you are a first time home buyer and the purchase price for an eligible residence is $425,000.00 or less than you are exempt from the tax. The definition of a first time home buyer, by the government, is if you have never owned a property anywhere in the world previously. A proportional exemption is provided for eligible residences with a fair market value of up to $25,000 above the threshold (i.e. up to $450,000).
The actual tax amount is 1% of the first $200,000.00 and 2% for everything thereafter. An example of this would be if someone purchased a home for 500K they would have to pay $2000.00 on the first 200K and $6000.00 on the remaining 300K.
I always advise anyone purchasing a home that you should have about 1.5% of the Purchase Price to cover closing costs in addition to your down payment. These closing costs would include the Property Transfer Tax. There are a number of other things to consider as well. They include:
Insurance Premium for mortgages with less than 20% down payment (Please note: this cost can be added to the mortgage instead of paying for it up front.
Lawyer or Notary fees
Utilities switch over to new property
Below are 2 links to the Government Websites which explain some of this information in greater detail
Tony Marchigiano | Mortgage Specialist - Mortgage Sales BC Region, RBC Royal Bank | Royal Bank of Canada | T. 604-505-7109 | F. 778-737-0054