Purchasing Expenses
There are one-time costs and ongoing expenses associated with purchasing a property. The largest one-time cost is a deposit of 5% of the purchase price which is usually due upon acceptance of an offer. The deposit amount can be applied to your down payment amount.
In addition, it is a good idea to have 1.5-2% of the purchase price set aside to cover closing costs.
One Time Closing Costs may include:
- Legal fees (Lawyer or Notary)
- Adjustments for prepaid expenses from seller (property taxes, strata fees, etc.)
- Property Inspection
- Moving expenses
- Service and utility hook up
- Renovations and repairs
- Property Transfer Tax
- GST
- Property Appraisal
- Survey of Land
Property Transfer Tax
It is paid to the provincial government: 1% on the first $200,000 and 2% on the remainder of the purchase price.
First time purchasers may be exempt from the property transfer tax if the purchase price is under the threshold of $425,000 and the property will be their primary residence. Upon closing your lawyer will apply for the exemption.
GST (Goods and Services Tax)
The current rate is 5%. GST is applicable on new construction and on the resale of properties that have been used commercially.
GST can be deferred on rental property if the buyer becomes a GST registrant and continues to rent the property nightly. A new owner of a rental property can register for GST with the help of their lawyer or accountant. Your rental management company then remits the GST charged on rentals. You will be required to file an annual GST return. Please consult a Canadian accountant for tax advice.
GST Rebate on New Homes
The GST/HST New Housing Rebate program provides a refund on the construction or purchase of most newly constructed or substantially renovated houses used as primary place of residence. The rebate reduces the GST on homes valued at $350,000 or less. The rebate is gradually reduced for homes valued from $350,000 to the maximum value of $450,000.
