Reverse Mortgages and Ontario Land Transfer Tax: What You Owe

"My lawyer just told me I owe land transfer tax on my reverse mortgage registration — I thought this was supposed to be a no-payment product. What is going on?" This is one of the most common surprises Ontario homeowners encounter during the reverse mortgage process. Yes, registering a reverse mortgage does trigger Ontario Land Transfer Tax (LTT) — and if you live in Toronto, you may owe municipal land transfer tax as well. Understanding these costs upfront is essential for budgeting. Here is the complete breakdown.

Why a Reverse Mortgage Triggers Land Transfer Tax

In Ontario, the Land Transfer Tax Act imposes tax not only on the purchase of real property but also on the registration of certain interests in land — including mortgages. When a reverse mortgage is registered on your property title, the Ontario government treats the mortgage amount as a taxable transaction.

This applies equally to all reverse mortgage lenders operating in Ontario: HomeEquity Bank (CHIP), Equitable Bank, Bloom Financial, and Home Trust.

The key distinction: you are not buying a property, so the full land transfer tax schedule that applies to purchases is slightly different from the mortgage registration tax. However, Ontario charges LTT on the registration of a mortgage at the same marginal rates as property purchases.

According to the Ontario Ministry of Finance, land transfer tax is payable on the registration of a charge (mortgage) on land, calculated on the principal amount of the mortgage being registered, at the same graduated rates that apply to conveyances (purchases) of real property.

Ontario Land Transfer Tax Rate Schedule

The provincial LTT rates for 2026 are graduated — meaning different portions of the mortgage amount are taxed at different rates:

Mortgage Amount Bracket	LTT Rate
First $55,000	0.5%
$55,001 to $250,000	1.0%
$250,001 to $400,000	1.5%
$400,001 to $2,000,000	2.0%
Over $2,000,000	2.5%

Note: These rates apply to the reverse mortgage principal amount being registered, not to the property value. If your home is worth $900,000 but you are registering a reverse mortgage of $250,000, the LTT is calculated on $250,000.

Sample LTT Calculations for Common Reverse Mortgage Amounts

Reverse Mortgage Amount	LTT Calculation	Total Provincial LTT
$100,000	($55,000 x 0.5%) + ($45,000 x 1.0%)	$725
$150,000	($55,000 x 0.5%) + ($95,000 x 1.0%)	$1,225
$200,000	($55,000 x 0.5%) + ($145,000 x 1.0%)	$1,725
$250,000	($55,000 x 0.5%) + ($195,000 x 1.0%)	$2,225
$350,000	($55,000 x 0.5%) + ($195,000 x 1.0%) + ($100,000 x 1.5%)	$3,725
$500,000	($55,000 x 0.5%) + ($195,000 x 1.0%) + ($150,000 x 1.5%) + ($100,000 x 2.0%)	$6,475

For most Ontario reverse mortgage borrowers — where the typical advance ranges from $100,000 to $350,000 — the provincial LTT will be between approximately $725 and $3,725.

Toronto Municipal Land Transfer Tax: The Double Tax

If you live in the City of Toronto, you face a second layer of land transfer tax. Toronto is the only municipality in Ontario that levies its own LTT, under the City of Toronto Act, 2006. This municipal LTT applies in addition to the provincial LTT.

The Toronto municipal LTT rates on mortgage registrations:

Mortgage Amount Bracket	Toronto Municipal LTT Rate
First $55,000	0.5%
$55,001 to $250,000	1.0%
$250,001 to $400,000	1.5%
$400,001 to $2,000,000	2.0%
Over $2,000,000	2.5%

The Toronto rates mirror the provincial rates, effectively doubling the land transfer tax for Toronto homeowners.

Combined LTT for Toronto Homeowners

Reverse Mortgage Amount	Provincial LTT	Toronto Municipal LTT	Total Combined LTT
$100,000	$725	$725	$1,450
$150,000	$1,225	$1,225	$2,450
$200,000	$1,725	$1,725	$3,450
$250,000	$2,225	$2,225	$4,450
$350,000	$3,725	$3,725	$7,450
$500,000	$6,475	$6,475	$12,950

For a Toronto homeowner taking a $250,000 reverse mortgage, the combined LTT cost is $4,450 — a material amount that must be budgeted for.

According to the City of Toronto, the Municipal Land Transfer Tax applies to all transfers and registrations of land within the city boundaries, including the registration of mortgages and charges, calculated on the principal amount secured by the mortgage.

How LTT Is Paid on a Reverse Mortgage

Unlike a home purchase where LTT is paid by the buyer at closing, the LTT on a reverse mortgage registration is typically handled in one of two ways:

Option 1: Deducted from reverse mortgage proceeds. Most borrowers choose this approach. The LTT amount is deducted from the initial advance before funds are disbursed to you. If your approved reverse mortgage is $200,000 and the combined LTT is $1,725 (outside Toronto), you receive $198,275 at closing (before other fees).

Option 2: Paid separately by the borrower. You can pay the LTT from your own funds if you prefer to preserve the full reverse mortgage amount for your intended use.

Rick Sekhon will walk through both options with you during the application process so there are no surprises at closing.

Complete Closing Cost Budget

The LTT is one of several closing costs associated with a reverse mortgage. Here is a realistic budget for an Ontario homeowner outside Toronto taking a $200,000 reverse mortgage:

Cost Item	Estimated Amount
Provincial Land Transfer Tax	$1,725
Independent legal advice (ILA)	$500 - $1,000
Appraisal fee	$300 - $500
Lender setup/administration fee	$1,795 (typical for CHIP)
Title insurance	$250 - $400
Title search and registration	$200 - $400
Total estimated closing costs	$4,770 - $5,820

For the same borrower in Toronto, add the municipal LTT of $1,725, bringing the total to approximately $6,495 - $7,545.

These costs are typically deducted from the reverse mortgage proceeds at closing. FCAC guidelines require lenders to provide full cost disclosure before you commit to the mortgage.

LTT on Refinancing or Increasing a Reverse Mortgage

If you later refinance your reverse mortgage or increase the amount (a "top-up"), you may owe additional LTT on the new or increased amount.

Scenario 1: Same lender top-up. If you increase your existing reverse mortgage with the same lender (e.g., topping up a CHIP reverse mortgage from $200,000 to $300,000), LTT is payable on the additional $100,000 registered on title. Some lenders may structure this as an amendment to the existing charge rather than a new registration, which can sometimes reduce the LTT owing. Discuss the specifics with your lawyer.

Scenario 2: Switching lenders. If you discharge your existing reverse mortgage and register a new one with a different lender — for example, moving from CHIP to Equitable Bank — the full amount of the new reverse mortgage triggers LTT. There is no credit for the LTT you paid on the original registration.

Scenario	LTT Owing
Initial $200,000 reverse mortgage	LTT on $200,000
Top-up with same lender: additional $100,000	LTT on $100,000 (additional amount)
Switch lenders: new $300,000 reverse mortgage	LTT on full $300,000
Discharge reverse mortgage (no new mortgage)	No LTT (discharge is not a new registration)

This is an important consideration when comparing lenders. Switching lenders mid-term to save on interest rates may be offset by the new LTT cost. Rick Sekhon can model the net savings for you, factoring in the LTT cost of any lender switch.

LTT Exemptions: Do Any Apply to Reverse Mortgages?

Ontario provides several LTT exemptions, but most do not apply to reverse mortgage registrations:

First-Time Home Buyer refund: This applies to property purchases, not mortgage registrations. It is irrelevant to reverse mortgage borrowers (who are existing homeowners aged 55+).

Spousal transfer exemption: Transfers between spouses are generally exempt from LTT. However, registering a reverse mortgage is not a transfer of property — it is a charge. The spousal exemption does not apply.

Farm property exemptions: Certain transfers of farm property between family members may be exempt. This does not apply to mortgage registrations.

FSRAO does not regulate land transfer tax directly, but licensed mortgage brokers like Rick Sekhon are required to ensure borrowers understand all costs, including LTT, before proceeding.

In practice, there is no LTT exemption available for reverse mortgage registrations in Ontario. The tax applies in full.

How LTT Compares to the Cost of Alternatives

To put the LTT cost in perspective, compare it to the costs of alternatives that Ontario seniors might consider instead of a reverse mortgage:

Option	Key Costs
Reverse mortgage ($200,000)	LTT: $1,725 (provincial); setup fee: ~$1,795; legal: ~$750
HELOC ($200,000)	LTT: $1,725 (same); legal: ~$500; no setup fee typically
Downsizing (sell and buy)	Real estate commission: ~$30,000-$50,000; LTT on new purchase: varies; moving costs: $5,000+
Private mortgage ($200,000)	LTT: $1,725 (same); legal: ~$750; lender fee: 2-4% of loan ($4,000-$8,000)

The LTT on a reverse mortgage is identical to the LTT on a conventional mortgage or HELOC of the same amount. The difference is that a reverse mortgage does not require monthly payments, while a HELOC does.

When compared to downsizing — which involves real estate commissions of 4-5% on the sale, LTT on the new purchase, and significant moving expenses — the LTT on a reverse mortgage is a fraction of the total cost.

Can LTT Be Financed Into the Reverse Mortgage?

Yes. Most reverse mortgage borrowers have the LTT (along with other closing costs) deducted from their advance. This means you do not need to come up with the LTT amount out of pocket. It does reduce the net proceeds you receive, but it eliminates the need for any cash outlay at closing.

For a $200,000 reverse mortgage outside Toronto, with approximately $5,000 in total closing costs (including LTT), you would receive approximately $195,000 in net proceeds. For the same amount in Toronto, net proceeds would be approximately $193,275 after the additional municipal LTT.

OSFI-regulated lenders must disclose the net advance amount clearly in the mortgage commitment letter. Your lawyer will also review these numbers with you during the independent legal advice session.

Planning Tips from Rick Sekhon

After arranging hundreds of reverse mortgages across Ontario, Rick Sekhon recommends these LTT planning strategies:

Request the maximum approved amount upfront. Because each new registration or increase triggers additional LTT, it can be more cost-effective to register for a higher amount initially — even if you do not draw the full amount immediately. Some lenders offer unadvanced credit facilities where LTT is only payable on the amount actually advanced. Ask Rick Sekhon about which lenders offer this structure.

Factor LTT into your lender comparison. If you are comparing offers from CHIP, Equitable Bank, Bloom Financial, and Home Trust, the LTT will be the same for identical mortgage amounts. But if one lender offers a higher advance, the LTT will be higher — factor this into the total cost comparison.

Budget for Toronto municipal LTT. Toronto homeowners sometimes forget the municipal LTT until closing. Rick Sekhon provides a complete cost breakdown, including both provincial and municipal LTT, in the initial consultation so you know the full picture from day one.

FAQ

Is the land transfer tax on a reverse mortgage the same rate as buying a house? Yes. Ontario charges the same graduated LTT rates on mortgage registrations as on property purchases. The tax is calculated on the mortgage principal amount (not the property value), using the same rate brackets.

Can I get a refund of the LTT if I pay off my reverse mortgage early? No. Land transfer tax is a one-time cost at the time of registration. It is not refundable if you discharge the mortgage early, pay it off, or sell the property. There is no provision in the Land Transfer Tax Act for a refund based on early repayment.

Does the LTT apply if I already have a conventional mortgage and add a reverse mortgage? Yes. Each new mortgage registration triggers its own LTT calculation. If you currently have a conventional mortgage registered on title and you add a reverse mortgage (or replace the conventional mortgage with a reverse mortgage), the reverse mortgage registration triggers LTT on the new amount.

Is LTT charged on the interest that accumulates on my reverse mortgage? No. LTT is charged only on the principal amount registered at the time of registration. The interest that accrues over the life of the reverse mortgage is not subject to additional LTT. However, if you later increase the registered amount (top-up), LTT applies to the increase.

Do other provinces charge land transfer tax on reverse mortgage registrations? British Columbia charges a Property Transfer Tax (PTT) on purchases but generally does not charge it on mortgage registrations. Alberta has no land transfer tax. Quebec charges transfer duties on property sales but generally not on mortgage registrations. Ontario's treatment — charging LTT on mortgage registrations — is relatively unusual in Canada.

Who actually pays the LTT — me or the lender? You (the borrower) are responsible for the LTT. However, the amount is typically deducted from your reverse mortgage proceeds at closing, so you do not need to write a separate cheque. Your lawyer handles the payment to the province (and to the City of Toronto, if applicable) as part of the closing process.

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Speak to a licensed mortgage professional and a qualified Canadian tax professional. Independent legal advice is required before closing a reverse mortgage in Ontario.

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This content is for illustrative purposes only. Rates may vary. Call Rick Sekhon for the best rates and more information.