Can you transfer a mortgage to a family member in Canada?
Yes, but we highly recommend consulting with your lawyer on this matter. We’ve outlined some of the key considerations and costs below.
Probate Fees:
Sometimes transferring property to a child is done after a parent passes away. This may involve a transfer-on-death deed.
Transferring property after death in Ontario will involve an estate administration tax, often called probate fees. In Toronto, probate fees are governed by the Estate Administration Tax. This is the responsibility of the trustee to ensure payment.
The tax rates vary depending on the estate's value.
Up to $50,000: Zero dollars
Over $50,000: $15 per $1,000 of estate value (The maximum estate administration tax payable is 1.5% of the estate's value)
Legal Fees:
Legal fees can vary depending on the complexity of the case, the attorney's rates, and the services required. It's essential to obtain a clear fee agreement upfront.
Property Appraisal:
Lenders may require a current appraisal of the property to determine its market value before approving a mortgage transfer.
Insurance Considerations:
The new borrower may need to obtain mortgage insurance or provide additional collateral, depending on the lender's policies.
Land Transfer Tax:
The beneficiary will be required to pay a land transfer tax. In Ontario, the tax rates are as follows:
a) 0.5% on amounts up to and including $55,000.
b) 1.0% on amounts exceeding $55,000, up to and including $250,000.
c) 1.5% on amounts exceeding $250,000, up to and including $400,000.
Property-related Costs:
Depending on the property's condition and any outstanding obligations, costs may be associated with repairs, maintenance, or settling outstanding debts such as property taxes, mortgages, or utility bills.
Gifting Real Estate to a Family Member in Ontario
With rising real estate prices and the aging demographic throughout Ontario, gifting real estate to members of the family is not uncommon. Older generations are increasingly thinking about transferring property as a gift. It’s important to be careful with this process, as CRA may want a gift too!
Is a Gift Deed taxable in Canada?
A Gift Deed is a legal document drafted with the assistance of a lawyer to formally transfer ownership of property such as real estate, cash or another asset. The gift is made without expectation of payment or reimbursement now or in the future.
Depending on the asset given away, there may be tax implications on the transfer. An example would be the gift of a piece of land that has appreciated in value. The appreciation is generally taxable to the person making the gift in the year that the gift is made.
How do I avoid capital gains when inheriting property in Canada?
The individual who inherits a property is not subject to capital gains tax when they receive property. Instead, it is the estate of the deceased individual that is responsible for paying taxes on the appreciation in the value of the gifted property, both to the date of the deceased and potentially to the date of the gift if further appreciation has occurred.
The appreciation at death is typically not taxed when the recipient is the deceased’s spouse or common-law partner (CLP), since the default treatment of the deemed disposition at death under Canadian tax law allows for a tax-free rollover at cost (vs. FMV) to the surviving spouse or CLP (or qualifying spousal trust) at death or during lifetime.
Who pays capital gains taxes on gifted property?
It is the giver of a gift, not the recipient who is subject to capital gains taxes on any appreciation of the property, from the time they take ownership of the property to the time they gift it to the recipient.