A Guide for the First Time Homebuyer in British Columbia
Buying Your First Home British Columbia
Purchasing and moving into a new home is a huge transition, and your furniture arrangements and neighbors aren’t the only things that are going to change. This major life event comes with a host of unique legal requirements and challenges that you’re unlikely to have encountered before. While most of the paperwork is easy to handle with the assistance of Vancouver Downtown Notary, there are a few subjects you might want to familiarize yourself with before you get the process started.
What Is the Property Transfer Tax Exemption Limit?
Property transfer tax is a special tax imposed by jurisdictions on transfers of real estate. Luckily for you, the British Canadian government maintains a special First Time Home Buyers’ Program that can provide a property transfer tax exemption for those who meet certain requirements. [1]
Your exemption eligibility is determined by your citizenship status and whether you’ve lived in B.C. for at least one continuous year immediately before you registered the property. You can also satisfy the residency requirement if you’ve filed B.C. income tax returns twice in the prior six years. If you previously owned interest in a principal residence anywhere in the world or you’ve received a first-time homebuyers’ exemption or refund before, you lose eligibility.
There are also a few qualifiers for the property in question. In addition to being located in B.C., it can only be used as your principle residence. It must also comprise no more than 0.5 hectares of land and be worth less than $475,000 on the fair market. Homes that fail to meet these standards may still be eligible for partial exemptions instead of the full tax amount. Finally, if you’re buying with a partner who doesn’t qualify, the percentage of the full exemption you receive will match the percentage of the stake you actually hold in the property.
Who Pays the Realtor’s Commission?
The licensee who helps you purchase a home is paid on a commission basis. The amount of this commission is generally a percentage of the sale price, but sometimes, licensees will request fixed sums. Most prospective homeowners are pleased to find that commissions are paid by the seller after the deal goes through. [2]
What Is the GST on New Homes?
British Columbia operates under a Provincial Sales Tax, or PST, scheme, but the rules governing such taxes were only implemented in 2013.[3] Regardless which form of tax your home’s build start date makes you eligible for, you’ll generally pay the same tax percentage.
GST works out to about 5 percent on new home construction for new homes started after April 1, 2013. Remember, however, that the fact that builders pay 7 percent PST on materials could impact your overall purchase price and tax obligation.
Also, if the home you are buying is not new but substantially renovated, it could still be subject to GST.
What Legal Fees Do I Need to Pay?
You don’t simply receive a contract, sign and call it a day. You should also get all finalized documentation authenticated by a notary public or lawyer. This service includes a small charge, but the long-term protection it offers makes it more than worthwhile.
You can expect to pay mortgage-specific fees that vary based on your financing terms. If you decide to retain the services of an lawyer, you’ll also have to pay them, but even if you manage most of the deal solo, you’ll still need to fund land title searches, registration and miscellaneous items. Your lender may also demand that a lawyer or notary public obtains a Survey Certificate, Title Insurance and other legal items on your behalf.
What’s the Time Table for Finalizing a Purchase?
When you sign your Contract of Purchase and Sale, you’ll note a transaction completion date that indicates when formal ownership transfers to you. There should also be a possession date specifying when you can actually move in, but it may not match the completion date. If you wish to make adjustments or financial modifications to the contract, you must do so before a stated deadline known as the adjustment date.
The property you’re buying may currently be tenanted. In such a case, your adjustments might include a clause demanding the seller give the current residents notice to vacate by a certain time. Other adjustments could comprise modifications such as requesting the seller perform additional building inspections. Once again, getting Vancouver Downtown Notary involved early on is critical to completing your documentation properly. By authenticating your contract, a notary public or lawyer can help you ensure your purchase retains legal validity and minimizes your tax liability.
To learn more about settling down in British Columbia, check out our other blogs, or feel free to contact us at 778-819-8553 or [email protected].
Sources:
[2] http://www.recbc.ca/consumer/sellinghome.html
[3] http://www2.gov.bc.ca/gov/content/taxes/sales-taxes/pst/publications/transitional-rules
[4] http://www.recbc.ca/consumer/buyinghome.html
