Note: The following information is believed to be accurate and is obtained from reliable sources. this page is for information only, INVIS Financial Group, its Agents, Principals and employees shall not be liable for any errors or omissions contained herein.
Guide to Provincial Property Purchase Tax Exemption
Each purchaser applying for exemption as a first time home buyer, must be a Canadian Citizen or permanent resident of Canada, and must have resided in British Columbia for at least one year prior to the purchase of their principal residence.
Each purchaser applying for an exemption as a first time buyer must not have previously owned a principal residence anywhere ( must be a first time homeowner )
The purchase price must not exceed $425,000 if located within British Columbia.
There is a further partial exemption for any purchase price of up to $450,000.
The amount borrowed must have a term of 1 year or greater. If the mortgage term selected is less than one year, transfer tax must be paid at time of registration, and an application for refund submitted after the first year.
The property purchased must be zoned residential as determined by the B.C.Assessment Authority, and land portion cannot exceed 0.5 hectares or 1.25 acres in area.
If a purchaser does not meet all of the above criteria, the Property Purchase Tax is applicable, and will be calculated at 1% of the first $200,000 of the purchase price, and 2% of the balance.
If the purchaser meets all criteria, and is exempt from paying the tax, the mortgage principal cannot be reduced by more than $13,000 during the first year.
Guide to Revenue Canada RRSP Home Buyers Plan
The Home Buyers Plan gives purchasers the ability to redeem up to $25,000 from their RRSP to buy, or build a qualifying home.The advantage for purchasers who participate in this program is that funds redeemed from their RRSP are not considered income, and are not taxed.
The Qualification Guidelines are as follows :
- The RRSP must be redeemed by the annuitant who is purchasing the home. Some "locked in" RRSP’s may not be eligible under the plan. Purchasers are asked to check with their RRSP issuer for their "Locked in" fund’s eligibility for redemption.
Purchasers must reside in Canada and be Canadian Citizens or landed immigrants at the time they receive funds under the plan
- Purchasers cannot have previously participated in the Home Buyers Plan (There are two possible exceptions : candidates who become non-residents, and candidates who cancel their participation and qualify again at a later date.)
- Each purchaser must enter into a written agreement to purchase or build a qualifying home. A qualifying home is considered to be new or existing residential housing, and excludes ownership of a share(s) in a rental co-operative.
- Each purchaser can redeem a maximum of $25,000.
- Each purchaser must be considered a first time buyer. A first time buyer is someone who has not owner- occupied their principal residence for the preceding five years, or has not resided with a spouse ( legal or common-law ) who has owner-occupied their principal residence in the preceding five years.
- Purchasers must owner occupy their home within one year of the purchase.
- RRSP contributions must be in the fund for 90 days prior to redemption.
- Purchasers have 15 years to reimburse their RRSP plan after redemption. Purchasers who fail to repay the minimum of 1/15th per year, must add the amount due to their taxable income.
First Time Buyer Closing Cost Credit
A 15% tax credit on real estate closing costs can claimed by first time buyers. The credit is claimed on your income tax return. A maximum credit of $750 may be claimed.
Home Renovation Tax Credit
A 15% tax credit is available on eligible home renovations over $1,000 and not more than $10,000. This is a temporary stimulus introduced by the 2009 Federal Budget. Where qualifying work is done or qualifying goods purchased after January 27, 2009 but before February 1, 2010.
High Ratio Mortgage Insurance
Any mortgage that is 80% or greater of a property’s fair market value is considered a "High Ratio" mortgage and must be insured against default.
Default insurance is designed to protect the lender in case of non-payment by the borrower. If the borrower defaults on the mortgage, the financial institution can submit a claim against the insurance policy for missed payments, while pursuing legal action.
Because insurers of "High Ratio" mortgages are at risk of claims, they set qualification rules that lending institutions must follow. For the institution to have valid default insurance, borrowers must meet the eligibility guidelines provided by the insurer.
The following are the basic eligibility requirements:
- The borrower must be a landed immigrant or Canadian Citizen, or on a valid work visa.
- The borrower should have been continuously employed by their current employer for at least one year. If there has been one year of continuous employment combined with a change of employer due to career advancement, the applicant can still be considered.
- Borrowers on probation or short term contracts are not normally considered.
- Self employed and commissioned employees must demonstrate two years of successful operation based on personal tax returns.
- Overtime, Bonus, and Part Time income can be considered if reasonable and expected to continue.
- Borrowers can select any mortgage term.
- Proposed household payments including mortgage, heat, taxes, and 1/2 strata maintenance fees, cannot exceed 32% of gross verifiable monthly income.
- Total monthly expenditure, including the mortgage payment, cannot exceed 44% of gross monthly verifiable income.
- Maximum amortization of 40 years.
Additional qualification guidelines for Regular and 0% Down programs :
- Borrowers may be required to demonstrate, at time of application, their ability to cover closing costs of at least 1.5% of the purchase price.
- Where the minimum down payment is being met by way of financial gift, the funds must be in the possession of the borrower within at least 15 days prior to the closing date.
The sliding scale for determining mortgage insurance programs is as follows:
- 80% to 85%, premium of 1.75% of mortgage amount.
- 85% to 90%, premium of 2.00% of mortgage amount.
- 90% to 95%, premium of 2.75% of mortgage amount.
- 95% to 100%, premium of 3.1% of mortgage amount.
The insurance premium can be added to the mortgage amount.
Qualification guide for Rental Property Loans
Effective April 19th 2010 the Department of Finance discontinued Insured Rental Loans, As of this date, High ratio insured rental loans through CMHC, Genworth or AIG are no longer available. The minimum down payment for rental loans through financial institutions is now 20% OAC. Rental income must be from a self contained unit. The maximum amortization is 35 years. Please note the maximum number of rental units permitted for residential lending is 4 or less. As a general guideline, most lenders will use 80% of rental income and offset this against mortgage payments, property taxes, heat, and condo fee expenses for qualification purposes. Further information available upon request.
Further information available upon request.