COSTS FOR BUYING A HOME
PROPERTY PURCHASE TAX
1% of the first $200,000.00 & 2% of the balance is payable to the Provincial Government at the time the transfer of title to the property is filed for registration in the Land Title Office
- you have never owned a principal residence anywhere in the world.
- you are a Canadian citizen or permanent resident of Canada.
- you have resided in B.C. for at least one year immediately prior to your application to register the purchase.
- the purchase price does not exceed $425,000.00. A partial exemption is available for homes between $425,000.00 and $450,000.00 (see formula below)
- you are financing at least 70% of the Purchase Price (fair market value) (this does not include any amounts borrowed from related individuals).
- the mortgage must have a term of one year or more.
- the property is occupied as your principal residence and you take occupancy within 92 days of registration of the transfer at the land title office and live inside the property for at least one year.
- Pro rata exemption where property exceeds .5 hectares or a portion of the property is not residential (i.e. commercial lofts) - purchase price of entire property must not exceed the price limitations.
If you are a first time buyer you may be exempt from paying the Property Purchase Tax if:
To calculate the amount of tax payable on homes between $425,000.00 and $450,000.00, use the following formula:|
Amount of PTT X ($450,000.00 - Purchase Price) |
|
$25,000.00 |
For example, assume a house is being purchased for $445,000.00. Normal Property Transfer Tax wouldbe $6,900.00 (i.e. 1% on the first $200,000.00 and 2% on remainder). Using the formula:
|
$6,900.00 X ($450,000.00 - $445,000.00) |
= $1,380.00 |
|
$25,000.00 |
Subtract $1,380.00 from $6,900.00 leaving $5,520.00 as the amount owing for the Property Transfer Tax. Other exemptions exist as well, such as a transfer of a principal residence between family members. For details on this and other exemptions, go to http://www.rev.gov.bc.ca/RPT/ and pick the "Property Transfer Tax" button located on the right hand side.
Property Transfer Tax should not be confused with Property Tax. The Property Transfer Tax is a one time tax paid to the Provincial Government by purchasers of real estate. The Property Tax is the tax paid on an annual basis to the local City/Municipality.
HARMONIZED SALES TAX
The Harmonized Sales Tax ("H.S.T.") came into effect in B.C. on July 1, 2010 and is a combination of the 5% federal G.S.T. and the 7% B.C. Provincial Sales Tax ("P.S.T."), resulting in a single sales tax of 12% in B.C.
When determining if H.S.T. is payable on real estate, try to remember this. Goods and services that were subject to G.S.T. are taxable under H.S.T. Goods and services that were not subject to G.S.T. are not taxable under H.S.T. A more complete explanation is below.
How does H.S.T. apply to used residential housing?
Used residential housing has not been subject to G.S.T. and will not be subject to H.S.T.
How does H.S.T. apply to new residential housing?
Much like G.S.T., H.S.T. is payable on the purchase price of newly constructed or substantially renovated residential homes. Substantially renovated is defined in the legislation as the removal or replacement of most of the house construction components except for the foundation, external walls, interior supporting walls, floor, roof and staircase.
This means that, without considering transitional rules and rebates, the price of a new home will increase by 7%.
Are there any rebates if the new home is to be the primary place of residence?
First, let us define primary place of residence. This means a home that you own, jointly or otherwise, that you intend to live in on a permanent basis. To be eligible, the intent to use the home as the primary place of residence must be evident at the outset of buying the home. A recreational cottage, an investment property or a property you might retire to in the distant future do not qualify.
If the Purchaser (or a certain related family member) is planning to reside in the new home as their primary place of residence, there are, depending on the purchase price, two rebates that may be available.
The first rebate is the G.S.T. New Housing Rebate, which existed prior to H.S.T. being introduced. This rebate was (and is) available to recover some of the 5% that is charged for G.S.T. and equals 36% of the G.S.T. portion of the price.
For example, assume the purchase price of a new home is $350,000 excluding H.S.T. The 5% federal portion of the H.S.T. (the "old G.S.T.") is $17,500. The G.S.T. New Housing Rebate is 36% of $17,500, which is $6,300. The net federal portion of the H.S.T. payable is then $17,500 less $6,300, which equals $11,200. This is exactly the same as under the G.S.T. rules.
The full G.S.T. New Housing Rebate is available for new homes priced up to $350,000. For homes valued between $350,000.00 and $450,000.00, the rebate is gradually reduced and is calculated by using the following formula (get ready to brush up on your high school math):
$6,300 x [$450,000 - the purchase price] / $100,000
For example, assume the purchase price of a new home is $400,000 excluding H.S.T. The partial G.S.T. NH Rebate is
$6,300 x [$450,000 - $400,000.00] / $100,000
which equals $3,150. The federal portion of the H.S.T. would be 5% of $400,000.00, which equals $20,000.00, less the partial G.S.T. New Housing Rebate of $3,150.00, for a net tax of $16,850.00.
There is no G.S.T. New Housing Rebate on homes valued at over $450,000.00.
The second rebate is a B.C. New Housing Rebate available to recover some of the 7% provincial portion of the H.S.T. ("B.C. New Housing Rebate"). The B.C. New Housing Rebate is 71.43% of the 7% provincial component of the H.S.T. paid, up to a maximum of $26,250. The maximum flat rebate of $26,250 applies to new homes priced at $525,000 and above. The conditions for claiming the B.C. New Housing Rebate mirrors the conditions for claiming the G.S.T. New Housing Rebate except that the B.C. New Housing Rebate is applicable to all qualifying properties rather than just those properties under $450,000.
In some cases, the Contract will state that if the Purchaser certifies that they qualify for the rebates and signs the completed rebate forms, the Developer will credit the Purchaser on the Statement of Adjustments for the applicable G.S.T. New Housing Rebate and B.C. New Housing Rebate amounts on completion. The Developer will then submit the signed rebate forms to Canada Revenue Agency ("C.R.A.") for reimbursement after completion. This will save the Purchaser from having to pay the full 12% H.S.T. on completion. Please note that if the Developer does not agree in the Contract to credit the Purchaser on completion for the rebates, the Purchaser will have to pay the full 12% H.S.T. on completion and will then have to apply directly to C.R.A. for the G.S.T. New Housing Rebate and B.C. New Housing Rebate afterwards which means the Purchaser will have to ensure that they have additional funds to cover the 12% H.S.T. on completion. Neither the G.S.T. New Housing Rebate nor the B.C. New Housing Rebate is available to a corporation or a partnership.
Are there any rental rebates?
If a Purchaser is planning to rent out the new home instead, then depending on the purchase price, two rebates may be available.
The G.S.T. New Residential Rental Rebate ("G.S.T. NRR Rebate") is available to recover some of the 5% federal portion of the H.S.T. Like the G.S.T. New Housing Rebate, the full G.S.T. NRR Rebate is only available on new homes priced up to $350,000. A partial G.S.T. NRR Rebate is available for homes priced between $350,000 and $450,000. The actual rebate calculations are identical to rebate calculations for the G.S.T. New Housing Rebate. To be eligible for the G.S.T. NRR Rebate, the Purchaser must meet certain conditions which include:
- the Buyer must not be entitled to claim input tax credits in respect of any part of the tax payable on the acquisition of the rental unit.
- the rental unit must be a "qualifying residential unit" which means the person applying for the rebate must be the owner of the unit and the unit must be a self contained residence as defined in the Excise Tax Act;
- the unit must be held by the owner for the purpose of making exempt supplies (for example, a residential tenancy);
- the unit must be used as a primary place of residence by the tenants and must be so used for at least one year and the buyer will have to provide a copy of the tenancy agreement showing a term of at least one year.
In addition, there is a B.C. New Residential Rental Property Rebate available to recover some of the 7% provincial portion of the H.S.T. ("B.C. NRR Rebate"). The B.C. NRR Rebate calculation is identical to the calculation for the B.C. New Housing Rebate and is 71.43% of the 7% provincial component of the H.S.T. paid, up to a maximum of $26,250. The maximum flat rebate of $26,250 applies to new homes priced at $525,000 and above. The conditions for claiming the B.C. NRR Rebate mirror the conditions for claiming the G.S.T. NRR Rebate except that the B.C. NRR Rebate is applicable to all qualifying rental properties rather than just those rental properties under $450,000.
Please note that the Developer is not allowed to credit the Purchaser on completion with either the G.S.T. NRR Rebate or the B.C. NRR Rebate amounts. This means the Purchaser will have to pay the full 12% H.S.T. on completion and then claim the G.S.T. NRR Rebate and B.C. NRR Rebate afterwards directly from C.R.A.. The Purchaser will have to ensure that they have additional funds to cover the 12% H.S.T. on completion. The G.S.T. NRR Rebate and the B.C. NRR Rebate are claimed on the same form. Therefore, even if the Purchaser does not qualify for the G.S.T. NRR Rebate because the purchase price is above $450,000, they still would fill out the section on the form for the B.C. NRR Rebate
ANNUAL PROPERTY TAXES
After the tax due date (most lower mainland areas taxes are due on the 1st business day in July) you will be required to pay a portion of the taxes for the balance of the year.
This also applies to utilities (water, sewer & garbage) if they are billed separately.
MORTGAGES
Your mortgage lender may require an application fee and an appraisal fee.
C.M.H.C. charges a fee based on the amount of the mortgage.
SINGLE FAMILY HOMES
The mortgage lender will require written proof of fire insurance coverage (an Insurance Binder). Most insurance agents charge a fee for an Insurance Binder, generally from $0 to $30.00.
The mortgage lender may require a Survey Certificate. If you are unable to obtain a copy of an existing survey from the Vendor or City/Municipality, a new one will cost approx. $200.00 plus GST.
STRATA TITLE HOMES
Strata Certificates required:
- Insurance Certificate - confirmation of insurance coverage on buildings & common property
- Form A - Certificate of Full payment of Maintenance Fees ( confirmation that strata fees are paid up to date.
- (the cost for all 3 certificates is usually between $30.00 & $60.00).
- some condominiums require you to pay a move-in fee of $50.00 to $100.00.
- Section 36 Certificate - sets out information on the Strata Corporation.
Legal costs do vary. When requesting a quote ask that it include fees, all disbursements (the cost of searches, registration fees, couriers, photocopies, faxes, land title agent's fees, etc.) and taxes (GST & PST or HST) to be charged.