The Home Buying Process
Get Pre-Approved
Property Transfer Tax (sometimes called PPT) is a sales tax charged by the BC Government on all transfers of real estate in BC.
Property Tax Adjustment
Interest Adjustment
Strata Cost Adjustments
Once you decide you are ready to purchase a home, speak to a mortgage broker and get pre-approved. Getting pre-approved allows you to secure an interest rate for up to 120 days and equally as important, determines how much of a mortgage you can afford. This allows you to narrow your home hunting to a price point that is comfortable for you and you finances.
Your mortgage advisor will have you fill out an application with questions regarding your personal finances and your credit information. The answers to these questions, along with the information they obtain while speaking with you, will give them an idea of your financial situation and your goals for home ownership.
This is also the stage at which you will learn about your credit score. If you need to fix some things on your credit, now is the time. During this time, try to avoid making any large purchases what will add to your debt load, keep your bills paid on-time, and keep credit inquiries to a minimum
Mortgage Closing CostsMany house purchases can get off track because buyers aren’t aware of closing costs. Providing all documentations to the lenders and making sure lawyers get all the information are just a few things that you might forget about.
Legal FeesA lawyer or notary will be necessary in the purchase process. Your lawyer will prepare the mortgage documents, have you sign the documents, and will transfer the property into your name. (Estimated cost $700-$1000)
Appraisal FeesAn accredited appraiser will look at your home and determine what the fair market value is for your home. They will compare recent sales of similar properties to determine the estimated value of your home. They will provide a report to your lender that confirms the value. (Estimated Cost -$250-500.)
The PTT rate is determined as follows:
· 1% on the portion of the price under $200,000· 2% on the portion of the price between $200,000 and $2,000,000
· 3% on the portion of the price over $2,000,000 to $3,000,000
· if the property is residential, a further 2% on the portion of the fair market value greater than $3,000,000 (effective February 21, 2018)
· If the property is classified as residential and farm, or is residential mixed class (such as residential and commercial), you pay the further 2% tax on only the residential portion of the property.
• PTT is not calculated on the GST component of the price, for sales where GST applies.
First Time Home Buyers Exemption- Do I qualify?
· Must be a Canadian citizen or permanent resident
· Lived in B.C for at least a year immediately before the date you register the property
· Filed at least 2 income tax returns as a B.C resident in the last 6 taxation years immediately before the date you register the property
· Have never owned a registered interest in a property that was your principal residence anywhere in the world at any time
· Have never received a first time home buyer's exemption or refund
and the property must:
· only be used as your principal residence
· have a fair market value of: $835,000 or less (effective April 1, 2024)
· be 0.5 hectares (1.24 acres) or smaller
· Contain only residential improvements
If t*If all the above requirements are met, then the purchaser will be exempt from property purchase tax on the first $500,000 of the purchase price of the property.
*If two people buy a home together and one is eligible for the First Time Home Buyers’ Exemption and one is not, then PTT will be charged proportionately to their ownership sharesPurchasers claiming the First Time Home Buyers’ Exemption must live in the home for at least the first year after purchasing the home.
You may qualify for a partial exemption from the tax if the property:
· has a fair market value less than: $835,000 but less than $860,000 (effective April 1, 2024)
· larger than 0.5 hectares
· has another building on the property other than the principal residence
Newly Built Home Exemption
•The Newly Built Home Exemption reduces or eliminates the amount of PTT a purchaser pays when purchasing a newly built home, including houses, apartments and townhomes.
- If the property was registered before April 1, 2024, the fair market value of the property at registration plus the cost to build your home must be less than $500,000 (or $525,000 for a partial exemption)
- If the property was registered on or after April 1, 2024, the fair market value of the property at registration plus the cost to build your home must be less than $835,000 (or $860,000 for a partial exemption)
- You must have built and moved into your home within the first anniversary from the registration date
- You must have continued to occupy the property as your principal residence to a date no earlier than the first anniversary of the registration date
For more information:
https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/exemptions/first-time-home-buyers
Property Tax Adjustment
You may have to pay some of your annual property taxes at the time of closing. This would be done when you sign at the lawyer’s office.
Interest Adjustment
The interest you will pay for receiving your mortgage funds before the official start of your mortgage.
Strata Cost Adjustments
For those purchasing a strata property, the adjustment works similar to the property tax adjustment. The difference is that strata fees are paid monthly not annually, so the adjustment will be based on the number of days in your completion month that you have ownership
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