Save HST with Re-Sale Housing
As of July 1, the harmonized sales tax (HST) came into effect and Ontario consumers will be hard-pressed to avoid this so called “tax on everything.” While that less than flattering nick name for the HST may be pretty close to the truth, it’s not completely accurate, especially when it comes to real estate, where the HST applies differently depending on the type of real estate, whether it is re-sale housing, newly constructed housing or business properties.
Anyone who has ever purchased a home or has considered purchasing a home knows that budgeting for taxes is an important part of determining what they can afford. Whether it is the on-going property tax, or the upfront land transfer tax, the cost of taxes on housing can add up.
With that in mind, one of the most important things to know about the HST is that, fortunately, it will not increase the tax burden on homebuyers who purchase re-sale housing. That’s because re-sale housing, which was never subject to provincial sales tax (PST) or the federal goods and services tax, will continue to be exempt from both taxes once they are combined under the HST.
The same is not true for newly constructed homes, which will be hit with additional tax under the HST. Newly constructed housing has always been subject to the GST, meaning thousands of dollars of tax for homebuyers choosing this option. Now, with the HST, new housing will also be subject to PST, meaning thousands of dollars in added costs for new homebuyers.
There is a silver lining for new housing: the provincial government provides a rebate of 75 per cent of the PST on the first $400,000 of a newly constructed home, or a maximum of $24,000. For example, someone purchasing a new home priced at $500,000 would face $40,000 in additional tax from the provincial portion of the HST, which would be reduced to $16,000 with the rebate. Obviously, the rebate softens the blow, but an extra $16,000 of tax for a newly constructed home is nothing to laugh at…….
Fortunately, homebuyers choosing to purchase a re-sale home don’t have to worry about paying HST on the price of their home.
There is also encouraging news when it comes to businesses. Although the costs of purchasing or renting a commercial property are subject to HST, businesses are allowed to claim tax credits to offset these costs. Even better, when purchasing a commercial property, the business can claim the tax credits immediately so that no upfront costs are incurred for the HST and cash flow is not impacted.
The HST is a reality and taxes on a long list of goods and services will increase. Although it would be nice if HST didn’t apply to any real estate transactions, there is some encouraging news for buyers of resale housing, who won’t see the purchase price of their home increase due to HST, and businesses buying or renting commercial properties, who will be able to offset their HST costs.
You can find the Resale Residential/Commercial/multiplexes/investment listings on webs sites as under
The next Bank of Canada interest rate meeting is September 8 ,2010.
What are the costs associated with buying a home?
First and foremost, you have to make sure you have enough money for a down payment – the portion of the purchase price that you furnish yourself.
To qualify for a conventional mortgage you will need a down payment of 20% or more. However, you can qualify for a low down payment insured mortgage with a down payment as low as 5%.
Secondly, you will require money for closing costs (up to 2.5% of the basic purchase price).
If you want to have the home inspected by a professional building inspector – which we highly recommend – you will need to pay an inspection fee. The inspection may bring to light areas where repairs or maintenance are required and will assure you that the house is structurally sound. Usually the inspector will provide you with a written report. If they don’t, then ask for one.
You will be responsible for paying the fees and disbursements for the lawyer or notary acting for you in the purchase of your home. We suggest you shop around before making your decision on who you are going to use, because fees for these services may vary significantly.
There are closing and adjustment costs, interest adjustment costs between buyer and seller and (depending on where you live) land transfer tax – a one-time tax based on a percentage of the purchase price of the property and/or mortgage amount.
Finally, you will be required to have property insurance in place by the closing date. And you will be responsible for the cost of moving.
Remember, there will be all kinds of things you’ll have to purchase early on – appliances, garden tools, cleaning materials etc. So factor these expenses into your initial costs.
You can find the Residential/Commercial/multiplexes/investment listings on webs sites as under
The next Bank of Canada interest rate meeting is September 8,2010.
This information is provided for the best interest in mind for the clients and customers to better understand the whole real estate transaction and realtor’s role
(The comments contained on this site are for information purposes only and do not constitute legal advice.)
If you have any questions/suggestion or require more information, please do not hesitate to contact me for buying or selling and also I will be happy to assist you negotiating your investment needs.
You can find the Residential/commercial/multiplexes/investment listings on webs sites as under
Sales Representative- REALTOR®,
RE/MAX Dynasty Realty Inc. Brokerage*
C: 647. 267. 6338 (Direct-Leave message or text)
P: 416.335.4335 | 905.471-0002 (page me-Have me)
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