First Time Buyer! | Top Ten Tips | Mortgage Calculator
Good News for the First Time Buyer!
If you are a first time buyer you may be exempt from paying the Property Purchase Tax, the qualifications are as follows:
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You must be a B.C. resident living in B.C. for one year.
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You must be moving into the property.
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It must be your principle residence.
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It must be the first principal residence you and your spouse have owned in B.C. or anywhere else in the world.
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You must have a mortgage with a term of one year or greater on the property, and the mortgage must be for an amount not less than 70% of the purchase price of the home.
Tip: If two people are purchasing a property and one has already owned a home before but the other qualifies for the first time home buyer exception, than the property transfer tax is paid on only half the purchase price and is exempt on the other half.
What Costs are involved with the Purchase of a Home?
Listed are the common costs for a typical residential real estate purchase.
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A Deposit is required when the offer to purchase is drawn up; typically range from $5,000.00 - $20,000.00 and perhaps more for deals with a long completion date.
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The remainder of your Down Payment (minimum 5% of the purchase amount) is due the day before your completion date.
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Building Inspection (optional) $250 - $600
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Site Survey (if an existing survey can not be found) or Title Insurance $250 - $300
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Lawyer or Notary fees & expenses $650 - $850 these costs will include investigating title, drafting documents, registration of sale and mortgage.
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Appraisal (if greater than 50% financed) $200 - $250
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CMHC fees (if greater than 75% financed) 3.75% of the borrowed amount, plus application fee of $75. The CMHC premium will be added to your mortgage amount.
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Fire Insurance (required if the home is financed) $250 - $1000
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Property Purchase Tax (first time buyer's may be exempt) 1% of the purchase price up to $200,000 and 2% for everything over.
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GST (only on new construction, substantially renovated homes, land created for resale or held by a dealer of land) 7% less the rebate of 36% of the GST paid for owner occupied properties.
How to use your RRSP to Buy a Home
The Home Buyers' Plan ("HBP") is a federally instituted government program designed to assist "qualified" buyers in the purchase of a new home. As a "qualified" buyer, you are allowed to withdraw funds from your RRSP to use as a down payment in the purchase of a home, without incurring a penalty. Until 1999, the program was available only once and you had to buy or build the qualifying home for yourself. However, the rules have changed.
You can participate in the HBP more than once in your lifetime. To re-participate in the HBP, your balance from your previous withdrawal must be fully repaid by the beginning of the year you want to re-apply. In addition, the federal government allows people with disabilities to participate in the Home Buyers' Plan to buy or build a more accessible home.
Regardless of no penalties for withdrawing funds, there are certain guidelines that must be followed in order to use the HBP.
1) There is a maximum of $20,000 that can be withdrawn from one individual's RRSP.
2) There can be a maximum of two first-time buyers in the purchase of a new home, and each individual can withdraw up to $20,000 for a total of $40,000.
3) The purchased home must be owner occupied.
4) The RRSP must be repaid within 15 years with minimum annual payments of 1/15th of the withdrawn amount - failure to do so will result in 1/15th of the RRSP initially withdrawn having to be added back to taxable income in any year the minimum re-deposit is not made.
5) You must not have owned a home within the past 5 years immediately prior to participating in the HBP.
The "HBP" also permits an individual to establish an RRSP with borrowed funds, and then use the resulting tax refund for a down payment. In this scenario, the individual borrows funds that are contributed to an RRSP. After a 90-day period, the RRSP is collapsed to repay the loan. When the individual receives their tax refund, it can be applied to the purchase of a home. These funds are considered as an acceptable source of down payment provided that the tax refund is in the individual's hands at the time of closing and the lender can verify that the borrower has other, liquid assets equal to 5% of the purchase price. If this option is something that you are interested in investigating further, please contact me as soon as possible. RRSP season is here and you maybe able to take advantage of the tax break for year 2002 by acting quickly.
The Home Owner's Grant
The basic grant can reduce your property tax by as much as $570. The minimum tax payable ($350) ensures that all homeowners (or eligible occupants, which includes an eligible occupant of an eligible apartment, housing unit, land cooperative or multi-dwelling leased parcel) contribute towards the funding of local services such as road maintenance and police protection.
For 2009, the basic grant will be reduced by $5 for each $1,000 of assessed value over $1,050,000, and is eliminated on homes assessed at $1,164,000 or more.
If your property's assessed value is over $1,050,000 but has more than one residence on it, you may still qualify for the home owner grant on one residence. For further information, please call our office toll-free in British Columbia at 1-888-355-2700.
To be eligible for the grant, you must meet the following criteria:
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You are a Canadian citizen or landed immigrant and ordinarily reside in British Columbia.
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You are the registered owner or eligible occupant of the home. The home must be located within the province.
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The home is your principal residence -where you live and conduct your daily activities. The grant does not apply to summer cottages, second homes or rental properties.
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Spouses who live together, including those who are married or who live together in a marriage-like relationship, including same-gender partners, can qualify for a grant on only one residence in the province in a calendar year.
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Spouses who live apart can each claim a grant on their principal residence if they have a written separation agreement or a court order recognizing the separation.
Please see the Eligibility Criteria for further conditions that may apply.
The grant should be claimed prior to the tax due date, even if you do not pay at that time. The grant is considered unpaid tax until it is claimed. By claiming the grant prior to the due date, you avoid paying a penalty on this portion of the tax.
You must apply for the grant each year after you receive your property tax notice and before December 31. The grant is applied toward the current year's property tax. It does not apply to School Referendum Taxes, arrears, delinquent taxes, penalties, utilities or user fees which may also appear on your tax notice.
Please see How to Apply for more information.
If you are over 65, have a disability, or receive a war veteran's allowance, you may be eligible for the Additional grant.