Bank of Montreal, Royal Bank of Canada, TD Canada Trust and Bank of Nova Scotia are all offering various deals on home mortgages to cover the cost of the transfer tax, which can amount to several thousand dollars. Different terms apply; contact your local branch for exact details.

The new tax will add up to 2% to the cost of both residential and commercial real estate transactions within the Greater Toronto Area, effective February 1st 2008.

The proposal met with controversy when it was put to the council earlier this year, with many business leaders fearing it would flatten a bull housing market in Toronto, and send buyers to the 905- outskirts.

In its approved form, buyers will be required to pay between 0.5 and 2% of the purchase price for residential or commercial properties, depending on the price. For example, the tax on a $400,000 home would come to $3725.

First-time home buyers will receive an exemption on the LTT for the first $400,000 of the purchase price, and any sales agreements signed by December 31st of this year will receive a full rebate on the tax.

The LTT is the first municipal property tax in Toronto’s history, and many of its opponents say it unfairly penalizes GTA residents, who must already pay a provincial land transfer tax.

This has many groups up in arms, concerned about impacting a fragile housing market, concerned about the impact on condominium owners who haven’t yet taken possession of condos under construction, and concerned about encouraging development outside the GTA and the resulting urban sprawl.

The proposed tax, unanimously endorsed by the city’s executive committee last week, starts at 0.5%, jumping to 1.5% for homes of $250,000 or more, and 2% for homes $400,000 and up.

If approved by the municipal council next month, the tax would take effect in January 2008. For an estimated 25,000 condo and new home-buyers, this could come as a nasty surprise.

Detractors point out that additional thousands in tax will inevitably reduce buyers’ down payment, adding to the mortgage burden and accruing additional interest.

Others are worried that the Toronto home resale market, which hit a record of more than 11,000 sales last month, will cool if the new measure takes effect.

To calm fears of a general slow-down in development, and to avoid discouraging new homebuyers from entering the market, the city may implement a rebate of up to $2000, but only for first time buyers of new homes.

To read more on the proposed tax, and its potential ramifications, visit the Toronto Star at http://www.thestar.com/Business/article/231132.