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HOME BUYING COSTS

1. Property Purchase Tax

The Provincial Government of British Columbia levies a property purchase tax (property transfer tax) rated at 1% of the first $200,000 plus 2% of the remaining amount.

This tax is applicable within the province every time a property is purchased, and is collected by the purchaser’s lawyer or notary public, at closing time and paid to the Government.

First-time buyers are eligible for exemption from this tax if:

The purchase price is less than $425,000 (full exemption)
You have never owned a primary residence anywhere in the world
You have been a Canadian citizen, or permanent resident, for the 12 months prior to the date of completion
You reside in the home for a minimum of 1 year following completion

2. Harmonized Sales Tax (HST)

Effective July 1st, 2010, the new 12% BC HST (British Columbia Harmonized Sales Tax) has replaced the 5% GST (Federal Goods and Services Tax), and the 7% PST (Provincial Sales Tax).

The HST, in effect a combination of the GST and PST, applies to all purchases in BC, with some limited exceptions.

The major change for the buyer of a new home is that until July 1st only the GST, and not the PST, has applied directly to the price, although the PST was included in the cost of materials required to build the home.

The calculation of the HST on new homes is complicated in that it includes rebates of a portion of the old GST and also on the BC portion of the HST. And to make it worse, there are sliding scales involved in the calculations up to a purchase price of $525,000. Confused yet? You’re not alone, I assure you.

The tax implications of this change for buyers of new homes in BC are considerable as the chart below outlines.

However, since my specialty is to find you the best mortgage for your needs, I leave the calculation of tax payable, etc., to others who specialize in that area: your realtor, financial advisor, notary or lawyer.

Here is a sample of rebate and tax payable amounts on properties up to $600,000:

Purchase Price HST (12%) Total Rebate Payable
$300,000 $36,000 $20,400 $15,600
$350,000 $42,500 $23,800 $18,200
$400,000 $48,000 $23,150 $24,850
$450,000 $54,000 $22,500 $31,500
$500,000 $60,000 $25,000 $35,000
$525,000 $63,000 $26,250 $36,750
$550,000 $66,000 $26,250 $39,750
$600,000 $72,000 $26,250 $45,750

Note that the rebate increases up to $26,500 at a purchase price of $525,000 and remains at that figure thereafter, regardless of the overall property price.

The 12% HST is also applicable to all costs and fees associated with all property purchase, whether new or not, including legal fees and closing costs.

The bottom line is that the total cost of a new home in the province now costs anywhere from 2% to over 7% more than with the old system.

While it is not clear if the major banks will include the HST in the calculation of your mortgage, it appears that most of our lenders will do so. Please contact me for further information on this topic as the situation continues to evolve.

Because a lot of this information is from third-party websites such as the Federal and Provincial governments, and a variety of real estate and legal websites and newsletters, the material presented here is inherently limited in scope and subject to change without notice.

Also, a review of these sources reveals quite a degree of different information, and/or interpretation.

Therefore, as with all such information, you should check with your realtor, lawyer, notary public or financial advisor, for all details, and for confirmation as to the accuracy of this information and for possible changes as they might occur.

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