hen purchasing a new home, in addition to the purchase price, legal fees, and disbursements, you will normally incur a number of additional expenses, including Land Transfer Tax, the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST), and adjustments.
One of the largest additional expenses when purchasing real property is the provincial land transfer tax. The amount the purchaser pays is set by each province, and in some cases, municipalities, and is usually calculated according to a schedule based on the purchase price of the property.
In British Columbia, buyers must pay a property transfer tax, which is based on the fair market value of the land and improvements. The tax is charged at a rate of 1% for the first $200,000, 2% for the portion of the fair market value that is greater than $200,000 up-to and including $2,000,000, and 3% on the portion of the fair market value greater than $2,000,000.
There is no tax payable by the seller.
A first-time home buyer may qualify for a rebate of the tax from the provincial government. For more information on land transfer taxes and rebates, see the answer in topic 396 Land Transfer Tax for details.
- GST / HST on the purchase price of new homes
The Goods and Services Tax (GST) and Harmonized Sales Tax (HST) do not apply to the purchase of used homes. If you buy a new home, however, GST or HST will be payable.
Currently, for new home buyers in other provinces, the GST payable is 5% of the purchase price, but most purchasers who buy a property for their own personal use (rather than as an investment property) may be entitled to a partial rebate of the GST, depending on the price and location of the property. Many builders include the GST in the purchase price, while others charge the GST in addition to the purchase price.
- GST / HST on transaction costs
Even if GST or HST is not payable on the purchase price of your home, GST or HST is payable on other transaction costs, such as legal fees and disbursements, real estate commissions, appraisals, home inspections, and survey fees. GST and HST is not payable on land transfer tax or mortgage insurance fees.
- GST/HST rebates for new home purchase
The purchase price of resale homes are exempt from the GST/HST, while the purchase price of new homes are subject to GST/HST. If you are a purchaser of a home, your property may qualify for a rebate of a portion of the GST/HST paid. You do not have to be a first-time homeowner to qualify, but the home must be your primary place of residence.
The property will qualify if you:
buy a new home, or a substantially renovated home, from the builder
buy a newly constructed house from a builder, where you lease the land from the builder under the same agreement to buy the house
buy a mobile home (or a floating home, not a house-boat) from a builder
buy a share interest in a newly-built, co-operative housing corporation
build, or substantially renovate your home, or construct an addition
rebuild your home due to fire
Buyers may also be eligible for further provincial and federal GST/HST rebates on various types of new home purchases. Visit canada.ca for more information.
If your purchase includes appliances, furniture, or other items that are left in the home, you may also have to pay the retail sales tax on the value of these items in provinces that have provincial sales tax.Adjustments
The amount of money due on the closing date of your purchase or sale will be “adjusted” to reflect the expenses of the property that should be paid by the seller and those that should be paid by the purchaser for the number of days of the year each of the parties will own the property. For example, the purchaser will be required to reimburse the seller if the seller has prepaid any property taxes. If a home is heated by an oil furnace, the seller will usually fill the tank before closing and the purchaser will pay the seller the cost of the full tank.
In addition to taxes and adjustments, purchasers are also responsible for a number of general administrative transaction costs. These include expenses such as legal fees, document searches and registration costs. Purchasers may also need to pay for mortgage insurance, title insurance, and possibly for a survey of the property if the seller is not able to provide them with one.
How to determine your total expenses
It is very important to know in advance how much money you will actually receive from the sale of a property and how much you will need for your purchase. Your lawyer will be able to calculate most of these costs for you and provide an estimate of the total. You can also find more information from Canada Mortgage and Housing Corporation.