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Posts tagged ‘Property Transfer Tax’

First Time Buyer Friday #7 – BC Property Transfer Tax (PTT) Exemptions

In my continuing series, First-Time-Buyer Fridays, I answer a common question from a first-time buyer. If you have a question to submit, first-time-buyer or experienced investor, put one in the comments below, or fire me an e-mail at Tim@TimAyres.ca.

The home buyer in BC gets shaken for more money

The home buyer in BC gets shaken for more money

Q. What’s this about Provincial tax when I buy a home? How much is the Property Transfer Tax (PTT)?

A. I touched on this briefly in my post about closing costs in BC. The BC Property Transfer Tax (PTT), sometimes known as the Property Purchase Tax (PPT) has been a thorn in the side of home owners since its inception in 1987. BC REALTORS® have been actively lobbying the provincial government to reduce or eliminate the tax, as it places an unfair burden on home buyers.

The BC PTT is calculated on the sale price of the property (or the “fair market value” if the transfer of property is a gift or bequest), at 1% on the first $200,000 and 2% on the balance. So, a $500,000 property would incur an $8000 tax in order to change hands. This is money that comes directly out of the pocket of the buyer. It cannot be financed, eating up a nice chunk of a down payment on the purchase.

There is some relief for first-time buyers, however. First-time buyers qualify for an exemption in many cases. You do not have to pay the PTT if you are:

  • a Canadian citizen or a permanent resident as determined by Immigration Canada,
  • a person who has resided in British Columbia for 12 consecutive months immediately prior to the date of registration of the transfer, or who has filed two income tax returns as a British Columbia resident within the last six years,
  • a person who has never, at any time, held a registered interest in a principal residence anywhere in the world (a principal residence is defined as the usual place where an individual resides), and
  • a person who has not previously received an FTHB exemption or refund.

The purchase price of the property must not be more than $425,000 to qualify for an exemption. Government has raised the exemption threshold in recent years, reflecting the increase in property prices across the province. For properties between $425,000 and $450,000, a partial exemption applies.

To calculate the partial exemption, you first need to figure out the tax that would be payable without an exemption. Let’s use a $435,000 property as an example. The tax at 1% on the first $200,000 an 2% on the balance on that property would be $6700. Then plug it into this formula:

(Partial exemption max price – purchase price) x Tax = exemption, subtract from tax.
(Partial exemption dollar threshold)

So, for this example,

(450,000 – 435,000) x 6700 = $4020. $6700 – $4020 = $2680 tax payable.
(25,000)

There are several other conditions and details about the PTT exemption, that are covered in this PTT Brochure.

If you have any questions about the PTT or any other real estate matter, please contact me at 250-885-0512, e-mail me at Tim@TimAyres.ca or use my contact form.

Tim Ayres – Sooke Real Estate Professional

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First Time Buyer Friday #4 – Closing Costs

Closing Costs

Closing Costs

In my continuing series, First-Time-Buyer Fridays, I answer a common question from a first-time buyer. If you have a question to submit, first-time-buyer or experienced investor, put one in the comments below, or fire me an e-mail at Tim@TimAyres.ca.

Q. What additional closing costs are associated with buying property in Victoria, Sooke, or anywhere else in British Columbia?

A. “But wait! There’s more!” This is how it can feel sometimes when you’re buying your first home. It seems sometimes that there is a big vacuum cleaner that is after your money. Welcome to closing costs.

When many first-time buyers start looking at homes, they often very carefully examine their credit, their savings, and calculate out to the penny what their anticipated monthly payment will be. Often, a large oversight is that they do not calculate closing costs or are completely unaware that they exist or just how much money they’ll need.

The largest chunk of the closing cost for most first-time buyers in BC is amount that you have to spend on legal fees. In order to register your mortgage on the title and register the title in your name, you must use either a lawyer or notary public to act on your behalf to convey the property from the sellers to you (often called conveyance or conveyancing).

There are advantages and disadvantages to using either a notary or lawyer. I spoke to Notary Public Sabrina Hanousek of Notaries on Douglas about her side of the story. Recently, Sabrina did an absolutely outstanding job and went above and beyond the call of duty for some of my clients who had a difficult situation arise at closing.

Sabrina says that people who choose to use a notary usually do so because they charge less than a lawyer, which is often the case, but not always. What they find out, however, is that notaries tend to have a lot of experience with real estate conveyance, because that is the bulk of their business in many cases. She also finds that notaries are more “hands-on” and rely less on support staff, and meet directly with the clients rather than delegating this task to secretaries. If things go wrong, she has access to experienced lawyers who can try and fix things. Sabrina charges $795 for a purchase, and $495 for a sale, all disbursements and taxes in. Some items like strata forms would be extra, and a purchase and a sale would sometimes be eligible for a small discount.

I spoke to Rob Connolly of Victoria law firm Jones Emery Hargreaves Swan about how a lawyer is different from a notary. While a lawyer’s fees are sometimes higher, they can deal with issues directly if they come up, rather than having to refer the file to a lawyer if the client used a notary, if, say, a dispute arose about something in the contract. There are also lawyers who specialize in nothing but real estate law, and would be very well equipped to handle any conveyance file. Most people that choose to use a lawyer to handle their real estate transactions do so for peace of mind, and they may already have a lawyer for other legal matters. Rob’s firm charges $800 for a purchase, plus $300-$500 for disbursements (documents, copying, etc). For a sale, it’s $600 plus $50-$75 for disbursements.  A $200 discount is offered if the client does both a sale and a purchase.

It’s best to get a referral from a friend or your real estate agent and to call around to get a few different quotes.

Another source of closing costs are any taxes payable on the purchase. GST is not payable on resale housing, but is payable on new housing, although it’s often included in the purchase price. The provincial property transfer tax (PTT) is calculated at 1% on the first $200,000 and 2% on the balance of the purchase price. However, most of the time, first-time buyers are exempt from paying it.

Depending on your financial institution, you may have to pay for an independent appraisal of the property you’re buying. Often, a mortgage broker will pay for the appraisal, that would be a good question to ask before deciding on who to get your mortgage from. If you have to pay, budget around $300-$500 for this.

Again, depending on the financial institution and type of property, you may need to have the property surveyed. In the Contract of Purchase and Sale, the seller has to provide a survey if it’s available, but often, especially with older properties, the survey is gone or outdated. Surveys can cost over $1000, but most financial institutions will accept title insurance instead, which insures the lender against depreciation caused by something that an up-to-date survey would discover, for example, that the house is not where it is supposed to be on the lot due to an error by the builder. A title insurance policy costs around $400.

Last but not least, you’ll need homeowner’s insurance. If you’re buying a condo, you’ll just need contents and liability insurance. These policies cost $300-$500 per year.

So, all told, you’ll want to set aside $1700-$2200 in addition to your down payment to cover closing costs. Remember this when calculating how much you can afford. And don’t forget a hundred bucks or so for pizza and beer for your friends when they help you move!

If you have any questions about buying your first home, or any real estate matter, call me any time at 250-885-0512 or e-mail Tim@TimAyres.ca. Be sure to check out the other First Time Buyer Friday posts!

Tim Ayres – Sooke Real Estate Professional

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Election Promises – Harper’s First Time Home Buyer Plan Is Garbage! [Video]

Prime Minister Stephen Harper announced this week that his government if elected, would help out first time home buyers by introducing a $5000 tax credit, to be rolled out over four years (whatever that means). While on the surface the “simple, modest and practical” plan sounds good (woot, $5000 from the gov’ment!) when you look at it it’s kind of bass-ackwards, and not that much money. Closing costs for a buyer of a property can run into the thousands of dollars, when you factor in appraisals, inspections, lawyer fees, title insurance and/or survey, and the Provincial property purchase tax. Harper’s tax credit would reduce your taxable income by a maximum of $5000, which translates to a maximum cash benefit of $750. And it comes in March or whenever you file your tax return. “Gee, thanks for the help last year when I bought my house and actually needed the money then.

I think the people who should be making election promises to first-time home buyers should be the Provincial governments. Here in BC, the government collects a tax of 1% on the first $200,000 and 2% on the balance for doing nothing. There is a first-time buyer exemption, but not everyone qualifies. I didn’t, my sister didn’t. Lots of my clients don’t. Obviously, this is a huge cash cow for the government and they’d hate to see it go, but it needs to be reduced or phased out.

Tim Ayres – Sooke Real Estate Professional

Your comments are welcomed and encouraged!
Just use the form or link below this post.

You can bookmark this post using the button below,
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BC Budget Increases First-Time Buyer PPT Exemption Threshold

For the fourth time in as many years, the British Columbia Government announced in its yearly budget last week that it was increasing the threshold for the first-time buyer property purchase tax exemption. The exemption threshold will rise from $375,000 to $425,000, reflecting the increase in real estate prices throughout the province over the past year. A proportional exemption is available for properties purchased for between $425,000 and $450,000.

Another change: Previously, to be eligible, buyers also had to take a mortgage of at least 70% of the property’s value, and if within the first year of ownership paid down the mortgage to less than 70% of the home’s value, they would lose their exemption. This has been phased out, and the mortgage may be paid down by any amount within the first year without losing the exemption.

A video about the budget:

http://timayres.vodpod.com/video/929642-video

Tim Ayres


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