If you are thinking of buying a home, you might be a little confused about HST and how it is going to impact your home buying budget. Most common questions that home buyers ask me are: Will I have to pay the HST?.... How much?....... On what?...
Questions differ from person to person but there is one question that everyone – and I mean everyone – asks: How can I save on HST?
Answers to all the above questions differ from situation to situation. So, while you are most welcome to send me your personal queries, here I am presenting a general overview of the HST and its possible impact your home buying dream.
I will begin with telling you about the HST in brief, and then its impact on you. The best part – how you can save on the HST – I will keep for the last, so that I could end this article on a happy note :).
HST (Harmonized Sales Tax), which is more talked about topic today than Canada’s 143rd birthday, will replace the GST and PST. The HST rate in Ontario is 13% of which 5% represents the federal part and 8% the provincial part.
HST and You
Closing bells have gone off for those homebuyers who tried but could not buy before July 1, 2010. Now the HST is in effect and the best way to deal with it is to be well-informed and well-prepared.
Here are some important facts you should know:
- Resale homes are sold without HST.
- New Home purchases are subject to HST.
- The HST will apply to most sales of newly constructed or substantially renovated housing.
- HST applies to most of the services provided in completing the real estate transaction.
- Condominium Status Certificate will be subject to the HST in Ontario.
- The HST rate in Ontario is 13%.
How can I save on HST?
Now, this is the “silver lining” part of the HST implications of home buying. There are ways to minimise its impact on you or – if you can’t avoid paying this new tax – how to get most out of it. So, let’s begin.
- Choosing the property that’s right for you
Resale homes are sold without HST. While buying a residential property, the biggest dollar amount that can be taxed is the purchase price of the property. You can save the 13% HST on the property price by opting for a RESALE home.
You don’t have to pay HST on the purchase price of a used residential home. Revenue Canada defines "used residential property" to include a previously occupied house, condominium, summer cottage, vacation property or non-commercial hobby farm.
- Check if you qualify for the Rebate
New Home purchases are subject to HST and the HST will apply to most sales of newly constructed or substantially renovated housing.However, you may qualify for an HST rebate. The existing GST/HST new housing rebate will remain in effect after July 1, 2010. An individual who purchases new housing together with land from a builder may be entitled to claim a GST/HST new housing rebate in respect of the GST, or the federal part of the HST (that is, rebate on 5% of the total 13% HST), paid by the individual on the purchase.
- Hire the knowledgeable professionals
HST is charge on these fees regardless of whether the house purchase is itself HST exempt or not. Knowledgeable professionals can save you time and money by offering proper guidance throughout the transaction – from finding the right property till your moving in to your new home. HST applies to most of the services provided in completing the real estate transaction including realtor’s commission (which is generally paid by the seller), appraisal feed, referrals, surveys and legal assistance.
Mortgage broker fees are HST exempt if the fees are charged separately from any taxable real estate commissions. As well, mortgages and interest on mortgages are HST exempt.
- Condominium Status Certificate (which is generally paid by the seller), will be subject to the 13 per cent HST in Ontario, however, the total cost of that status certificate will remain at $100.
These are some of the key points. And as I mentioned earlier, the HST implications may vary depending on the price and type of the property and many other factors. The best way to tackle this issue will be to have a professional advise you.