The Benefits of Being a First Time Home Buyer
Being a First Time Home Buyer is an amazing accomplishment that comes with many responsibilities and incentives. Discussed in our previous blog The First Time Home Buyer’s Incentive Plan otherwise referred to as the FTHB is a Canadian Government program, which contributes up to 10% to the down payment for First Time Home Buyers. This is an effort to support borrowers in their first home purchase to reduce their monthly mortgage payments, without contributing to their financial burdens. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding the Benefits of Being A First Time Home Buyer.
Another important incentive available to First Time Home Buyer’s Program reduces or eliminates the amount of Property Transfer Tax you pay when you purchase your first home. If you qualify for the program, you may be eligible for either a full or partial exemption from the tax. If one or more of the purchasers don’t qualify, only the percentage of interest that the first-time homebuyer(s) have in the property is eligible.
For example, if you acquired 60% interest in the property and another person acquired 40% interest but only you meet the qualifications, only your 60% would receive the exemption.
When you purchase or gain an interest in property that is registered at the Land Title Office, you or your legal professional must file a property transfer tax return and you must pay the property transfer tax unless you qualify for an exemption. In most cases, property transfers are completed by a legal professional. The property transfer tax is based on the fair market value of the property (land and improvements) on the day it was registered with the Land Title Office unless you qualify for an exemption or purchase a pre-sold strata unit.
Property transfer tax should not be confused with annual property taxes. Annual property taxes are paid yearly to your municipal or rural tax office for each property you have registered interest in to fund services in your area.
There are three things to consider when calculating your total property transfer tax:
General Property Transfer Tax
- The general property transfer tax applies to all taxable transactions.
- The general property transfer tax rate is:
- 1% of the fair market value up to and including $200,000
- 2% of the fair market value greater than $200,000 and up to and including $2,000,000
- 3% of the fair market value greater than $2,000,000
Further 2% on residential property over $3,000,000
- If the property has residential property worth over $3,000,000, a further 2% tax will be applied to the residential property value greater than $3,000,000.
- If the property is mixed class (such as residential and commercial), you pay the further 2% tax on only the residential portion of the property.
- If the property includes land classed as farm only because it is used for an owner’s or farmer’s dwelling, up to 0.5 hectares will be treated as residential property.
Additional property transfer tax
- If you’re a foreign national, foreign corporation or taxable trustee, you must also pay the additional property transfer tax on the fair market value of the residential portion of the property if the property is within a specified area of B.C.
To qualify as First Time Home Buyer and receive the full exemption, at the time the property is registered you must:
- Be a Canadian citizen or permanent resident
- Have either:
- 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 registration date
- 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 buyers’ exemption or refund
The property must:
- Only be used as your principal residence
- Have a fair market value of $500,000 or less
- Be 0.5 hectares (1.24 acres) or smaller
You may qualify for a partial exemption from the tax if the property:
- Has a fair market value less than $525,000
- Is larger than 0.5 hectares
- Has another building on the property other than the principal residence
Foreign Buyer’s Tax:
The Foreign Buyer’s Tax is designed to limit foreign investment. Individuals who are NOT Canadian citizens or permanent residents in Canada, when purchasing property MUST pay an additional 15% Property Transfer Tax.
This tax helps lower the demand for new homes, which reduces upward pressure on home prices.
If the property transfer is within the following areas, the tax rate is 20% on the fair market value:
- Capital Regional District
- Fraser Valley Regional District
- Metro Vancouver Regional District
- Regional District of Central Okanagan
- Regional District of Nanaimo
The tax does not apply on Tsawwassen First Nation treaty lands.
There are a few incentives available federally included in the First Time Home Buyer’s program but before deciding if these products are right for you and your future, it is important to understand the ins and out of both.
If you are interested in learning more about the FTHBI Program or need information on Property Transfer Tax, please feel free to reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice.
At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.