Real Estate

Change of Covenant and Land Transfer Tax

  • Last Updated:
  • May 9th, 2021 10:04 pm
[OP]
Sr. Member
May 3, 2010
504 posts
162 upvotes

Change of Covenant and Land Transfer Tax

So I co-own a property with my sibling who was originally added at 1% ownership to the title and the mortgage as a co-signer. Now that mortgage has been considerably paid off, i want to take the sibling off the title and the mortgage so they can go and buy a home of their own. Question is, would I have to pay land transfer tax? If yes, on what?

Lets assume as an example:

Original purchase price: 300k
Current Market value: 500k
Mortgage remaining: $150k

My ownership percentage: 99%
Siblings ownership percentage: 1%

Any help will be great. Didn't find this info on Google. Called a RE lawyer who didn't give me a clear answer either.
10 replies
[OP]
Sr. Member
May 3, 2010
504 posts
162 upvotes
idontwantausername wrote: talk to another lawyer?
I have another appointment booked but that's not until Wednesday. Thought I'd check with some knowledgeable ppl here.
Deal Addict
Jul 3, 2007
3434 posts
3769 upvotes
Toronto
GameChannel wrote: So I co-own a property with my sibling who was originally added at 1% ownership to the title and the mortgage as a co-signer. Now that mortgage has been considerably paid off, i want to take the sibling off the title and the mortgage so they can go and buy a home of their own. Question is, would I have to pay land transfer tax? If yes, on what?

Lets assume as an example:

Original purchase price: 300k
Current Market value: 500k
Mortgage remaining: $150k

My ownership percentage: 99%
Siblings ownership percentage: 1%

Any help will be great. Didn't find this info on Google. Called a RE lawyer who didn't give me a clear answer either.
you are not adding someone on title, that is when you pay LTT....

FYI the lender or bank has to approve your sibling being removed, you have to qualify for the mortgage on your own....
Deal Expert
May 30, 2005
46098 posts
6588 upvotes
Richmond Hill
joepipe wrote: you are not adding someone on title, that is when you pay LTT....

FYI the lender or bank has to approve your sibling being removed, you have to qualify for the mortgage on your own....
^^This - you'd need to basically break your mortgage (and pay any associated fees) and requalify. Seriously make sure all the ducks are lined up before you do any of this.
Deal Addict
User avatar
Apr 6, 2008
1611 posts
125 upvotes
Toronto
I am not a lawyer so please do not take my views to be 100% correct and your Lawyer would be able to give you the correct picture.

As far as I know, the LTT in your case would be charged on these amounts. 1% of the mortgages balance remaining plus any other consideration you give to your sibling for acquiring the 100% title of the property.

This link may provide some clarification.

https://www.fin.gov.on.ca/en/tax/ltt/faq.html
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[OP]
Sr. Member
May 3, 2010
504 posts
162 upvotes
Thanks for the responses everyone.

I just spoke to another lawyer who seems to have done this before. She told me LTT would not apply as both of us had paid it initially when the property was bought. The sibling would, however, need to pay capital gains tax on their 1% which is marginal so I'm not worried about it. And no separate legal representation will be needed.

I was already aware that I would need to qualify for the mortgage on my own which I had already initiated with my lender last week.
[OP]
Sr. Member
May 3, 2010
504 posts
162 upvotes
Jon Lai wrote: ^^This - you'd need to basically break your mortgage (and pay any associated fees) and requalify. Seriously make sure all the ducks are lined up before you do any of this.
Yep, I understand that. Spoke to my lender and they are reviewing whether I'd qualify on my own. Once they approve and I do a title change, they'd discharge my mortgage and give me a new mortgage with the same terms. Essentially a lift and shift. But if I don't qualify on my own, they'd let me keep the current mortgage with my sibling and continue.
Deal Fanatic
Feb 4, 2015
7039 posts
3269 upvotes
Canada, Eh!!
If doing a covenant change then that has to be done first [once lender approves you for mortgage] and then lender will advise those conditions fulfilled and lawyer can then make title/deed change.

You would then continue with current mortgage terms.

That is to say you don't necessarily have to discharge current mortgage unless doing so would give you better terms.

Steps:

Apply for covenant change to remove person from mortgage
Lender approves you to take over mortgage without sibling and charges covenant change fee
Lender advises you have fulfilled client conditions and now lawyer has to fulfill lawyer conditions [lender will give list of items for lawyer to fulfill on your behalf]
Lawyer conditions fulfilled and lender advised so
Lender authorizes lawyer to transfer deed/title
Lender issues Mortgage Release document to your sibling so can get mortgage for themselves


Note: Depending on financial conditions a person can be approved for more then one mortgage.
.......
July 13, 2017 to October 25, 2018: BOC raised rates 5 times and MCAP raised its prime rate next day each time.

2020: BOC dropped rates 3 times and MCAP waited and waited to drop its prime rate to include all 3 drops.
Deal Fanatic
User avatar
Dec 3, 2004
5754 posts
5334 upvotes
Edmonton
Curious... is it still possible to do this in today's landscape (1% / 99% co-signer) or is that not allowed anymore?

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