Home Buying Considerations
Effective December 2024, if the purchase price is over 1.5M, CMHC is not eligible, and the banks require a minimum of 20%+ as down payment
The majority of lenders will back (approve) a buyer whose monthly house payment will not exceed 35 percent of their gross monthly income (GDS – Gross Debt Servicing). Lenders also require the borrower’s overall debt payments to fall below 42 percent of their gross monthly income (TDS - Total Debt Servicing) CANADIAN MORTGAGE HOUSING
1 - https://www.cbc.ca/news/business/housing-mortgage-rules-freeland-1.7324474 https://www.cmhc-schl.gc.ca/consumers/home-buying/mortgage-loan-insurance-for-consumers/what-are-thegeneral-requirements-to-qualify-for-homeowner-mortgage-loan-insurance
FEDERAL GOVERNMENT
HOME BUYERS PLAN (HBP)2
The Home Buyers’ Plan (HBP) is a program that allows you to withdraw funds from your Registered Retirement Savings Plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. The HBP allows you to pay back the withdrawn funds within a 15-year period.
You can withdraw funds from more than one RRSP as long as you are the owner of each RRSP account. Your RRSP issuer will not withhold tax on withdrawn amounts of $35,000 or less. Some RRSPs, such as locked-in or group RRSPs, do not allow you to withdraw funds from them.
FIRST HOME SAVINGS ACCOUNT 3
Qualifying first-time buyers can contribute up to $8,000 yearly to a maximum of $40,000 towards a downpayment. Contributions are tax deductible; capital gains (earnings) and interest are tax-free. Can be used together with the Home Buyers’ Plan.
BUYERS TAX CREDIT (HBTC)4
First-time home buyers who acquire a qualifying home can claim a non-refundable tax credit of up to $750. The value of the HBTC is calculated by multiplying $5,000 by the lowest personal income tax rate (15% in 2022).
2 - https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyersplan/participate-home-buyers-plan.html
3 - https://www.canada.ca/en/department-finance/news/2022/08/design-of-the-tax-free-first-home-savings-account.
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4 - https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/federal-governmentbudgets/budget-2022-plan-grow-economy-make-life-more-affordable/first-time-home-buyers-tax-credit.html
BC GOVERNMENT
Reduces property taxes for home owners with an assessed or partitioned value up to $2.125 million. Grant reduced by $5 for each $1,000 above the threshold. The home owner grant threshold applies across the province. The amounts are:
• $570 for the basic grant;
• $770 if the home is located in a northern or rural area;
• Up to $845 for home owners age 65 and more or a home owner with a disability; and
• Up to $1,045 for home owners age 65 and more or a home owner with a disability where the home is in a northern or rural area.
The speculation and vacancy tax is designed to turn empty homes into housing for British Columbians, and ensure foreign owners and those with primarily foreign income contribute fairly to B.C.’s tax system. Registered owners of residential property in a designated taxable region must complete a declaration each year to declare their residency status and how their property has been used. You have to declare each year because your circumstances may change during the year. Your declaration is due on March 31 of each year.
This tax is an annual tax that applies based on:
• How property owners use their residential property
• The property owner’s residency status
• Where property owners earn and report their income
Vancouver Real Estate
Recent Changes
CITY OF VANCOUVER – EMPTY HOMES TAX7
For the 2023 reference year (January 1-December 31, 2023), if your property was declared as empty, you will be required to pay a 3% tax on the assessed value of your property. On May 10, 2023, City Council voted to keep the EHT rate at 3% for 2023 and approved new or amended exemptions to improve the fairness and effectiveness of the EHT program.
B.C. GST PAYABLE ON NEWLY CONSTRUCTED HOMES 8
British Columbia Goods and Services Tax (GST) is a 5% tax you pay on goods or services for personal use and enjoyment. Much like the GST you pay for the purchase of clothing, the same principle applies to the purchase of a new home in BC.
GST is charged on top of the purchase price of the home, and applies only for new homes in BC. This means that GST is payable on newly constructed properties such as a pre-sale high-rise condo sold by a developer, or an owner builder home. (usually detached)
Any property that is not brand new (has been lived in) and has been used for residential purposes in the past are exempt from GST. Essentially, the GST has already been paid for at the first point of purchase.
CANADIAN FOREIGN BUYER BAN 9
As part of using all possible tools to make housing more affordable for Canadians, the ban on foreign ownership of Canadian housing, which was originally set to expire on January 1, 2025, will be extended to January 1, 2027. Foreign commercial enterprises and people who are not Canadian citizens or permanent residents will continue to be prohibited from purchasing residential property in Canada.
The Act defines residential property as buildings with 3 dwelling units or less. This includes semi-detached houses and condominium units. The Act doesn’t prohibit the purchase of larger buildings with 4 or more dwelling units. Non-Canadians can purchase residential properties located outside of Census Metropolitan Areas (CMA) and Census Agglomerations (CA). Certain exceptions apply allowing Non-Canadians to purchase a residential property in defined circumstances. If a non-Canadian, or anyone who knowingly assists a non-Canadian, is convicted of violating the prohibition, they will have to pay a fine of up to $10,000. Additionally, a court can order the sale of the residential property.
HOME BUYER RECISSION PERIOD
The HBRP, commonly known as a “rescission period,” gives buyers the right to withdraw from a purchase agreement within a specified period of time after an offer is accepted. Without a rescission period, if a buyer wishes to terminate an unconditional contract, they would need to negotiate with the seller and would typically face significant financial penalties or legal ramifications. Buyers who exercise their right to rescind will have to pay a fee of 0.25% of the purchase price. For a $1,000,000 home, this would result in a $2,500 fee paid to the seller.
BC HOME FLIPPING TAX10
The BC home flipping tax applies to the income you earn from selling a property in British Columbia (including presale contracts) if you owned the property for less than 730 days. The tax is imposed under the Residential Property (ShortTerm Holding) Profit Tax Act, which takes effect starting January 1, 2025.
The tax rate is 20 percent of income earned from a property sold within 365 days, and the rate decreases over the next 365 days. At 730 days, the tax no longer applies.
Common Purchaser Terms & Conditions
SUBJECT TO STRATA DOCUMENT REVIEW & APPROVAL
Strata Documents including financial reports, depreciation reports, by-laws, rules, financial assets, strata plan, title are reviewed either prior to making an offer or after offer is accepted.
SUBJECT TO FINANCING
If mortgage financing is needed, a financing condition is included for bank to provide their final approval with respect to the actual property chosen and after they have completed their due diligence, i.e appraisal.
SUBJECT TO INSPECTION
An inspection of the property by a qualified home inspector is recommended in most situations to inspect the finer details of the home and provide you with a comprehensive report of findings and recommendations to maintain a healthy property.
