first time home buyers

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THE FIRST TIME HOME BUYERS’ PROGRAM

BC Introduces Innovative New Program to Help First-Time Homebuyers

In a move to help BC citizens and residents buy their first home, the BC government announced today that it is launching a new program to augment down payments for first-time buyers. The B.C. Home Owner Mortgage and Equity Partnership program contributes to the amount first-time homebuyers have already saved for their down payment, providing up to $37,500, or up to 5% of the purchase price, with a 25-year loan that is interest-free and payment-free for the first five years. Through the program, the Province is investing about $703 million over the next three years to help an estimated 42,000 B.C. households enter the market for the first time.

During the first five years, no monthly interest or principal payments are required as long as the home remains the homebuyer’s principal residence. After the first five years, homebuyers begin making monthly payments at current interest rates. Homebuyers will repay the loan over the remaining 20 years, but may make extra payments or repay it in full at any time without penalty. The loan must be repaid in full when the home is sold or transferred to another owner.

To be eligible, buyers must be preapproved for an insured high-ratio first mortgage (mortgage down payment is less than 20% of the home price). On completion of the sale, program funds will be advanced and the loan will be registered as a second mortgage on the property’s title.1?

Applications will be accepted starting January 16, 2017. This will be a three-year program with loans advanced from February 15, 2017 until March 31, 2020.

Eligible homebuyers

All individuals with a registered interest on title must reside in the home and:

  • Be a first-time homebuyer
  • Have been a Canadian citizen or permanent resident for at least five years
  • Have resided in BC for at least 12 months
  • Have a combined gross income of $150,000 or less
  • Have saved at least half of the minimum down payment they will require
  • Must be pre-approved for the first mortgage before applying

The first mortgage must be high-ratio insured from an NHA approved lender for more than 80% of the purchase price.

Eligible Properties

Any legal, self-contained, mortgageable residence located in BC

  • Must be used as a principal residence for the first 5 years
  • Rental properties and seasonal or recreational properties are not eligible
  • The purchase price cannot exceed $750,000

Home Partnership Loans

  • Up to 25-year term, registered as a second mortgage
  • No interest or principal payments for the first 5 years
  • Monthly principal and interest payments begin in year 6, amortized over remaining 20 years
  • Interest rate for years 6 to 10 set near first mortgage rate at time mortgage is registered
  • Interest rate reset to near first mortgage rate at years 10, 15, and 20
  • Homeowner may repay in full or part at any time without penalty.

The loan is due and payable in full upon

  • The home ceasing to be the primary resident in the first 5 years
  • Default on the first mortgage
  • Sale of home or change of ownership
  • Any other default on the Home Partnership second mortgage

 

 

 

First Time Home Buyers’ Program

The First Time Home Buyers’ 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 home buyer(s) have in the property is eligible.

For example, if you qualify and purchase a property with a fair market value of $400,000 with a person that doesn’t qualify you would still qualify. If you owned a 60% interest in the property, 60% of the tax amount would be eligible for the exemption.

Do I Qualify?

To qualify for a full exemption, at the time the property is registered you must:

  • be a Canadian citizen or permanent resident
  • have lived in B.C. for 12 consecutive months immediately before the date you register the property or filed at least 2 income tax returns as a B.C. resident in the last 6 years
  • have never owned an interest in a principal residence anywhere in the world at any time 
  • have never received a first time home buyers’ exemption or refund

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You may qualify for a partial exemption from the tax if the property:

  • be located in B.C.
  • 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

           Partial Exemption 

  • has a fair market value less than:
    • $525,000 if registered on or after February 22, 2017
  • is larger than 0.5 hectares
  • has another building on the property other than the principal residence
BC Property Transfer Tax Rates
Purchase Price of HomeProperty Transfer Marginal Tax Fee
First $200,0001.0%
$200,000 to $2,000,0002.0%
$2,000,000 to $3,000,0003.0%
Over $3,000,0005.0%
BC Land Transfer Tax Rebates
Purchase Price of HomeFirst-Time Buyer Rebate
Up to $499,999Full Tax Refund
From 500,000 to 524,999Partial Rebate, See Calculator
Over $525,000No First Time Buyer Rebate

Transaction Costs

 

Closing  costs to the sellers

1-Lawyer or Notary Fees and Expenses:

-attending to execution of documents.

2-Costs of clearing title, including:

-discharge fees by encumbrance holders,

-prepayment penalties

3-Real Estate Commission.

4-Capital Gain ( if applicable)

Closing  costs to the Buyers

1-Lawyer or Notary Fees and Expenses:

-attending to execution of documents.

2. Property Appraisal Fee

3.Land Survey ( if applicable)

4.Property Purchase Tax ( Property Transfer Tax)

5.Good and Services Tax (New Homes)

6.CMHC or Genworth Premiums ( non conventional mortgage)

7.Foreign Buyers Purchase Tax ( 20% in most of of BC)

Property Transfer Tax ( Property Purchase Tax)

Property Transfer Tax. Home buyers in BC pay a provincial Property Transfer Tax (PTT) when they buy a home. The tax is charged at a rate of 1% on the first $200,000 of the purchase price and 2% on the remainder up to and including $2 million. The PTT is 3% on amounts greater than $2 million.,

 

To qualify for the First Time Home Buyers’ exemption you must meet all of the initial eligibility criteria. To retain the exemption, there are also requirements which must be met in the year following the transfer. For complete information on all of the eligibility criteria, please see:

  • Bulletin PTT 004, First Time Home Buyers’ Program

  • Instructions for Completion of the First Time Home Buyers’ Tax Return

  • First Time Home Buyer’s Program- Follow Up

To claim the exemption you must file a First Time Home Buyers’ Property Transfer Tax Return (FIN 269) and the appropriate Land Title forms at the Land Title Office when you apply to register your property.

 

If you do not qualify at the time of registration, but you meet all the requirements by the first anniversary of the registration date, you can apply for a refund of the tax paid. Applications for refund must be made within 18 months of the registration date.

The B.C. government has announced it is raising the Speculation and Vacancy Tax on Dec. 31 from 0.5 per cent to two per cent for foreign owners and for satellite families, the majority of whose income is not reported on a Canadian tax return.

Some new exemptions to the tax will be brought in while others currently in place will be phased out.

“When we introduced the Speculation and Vacancy Tax, our province was at the peak of a real estate crisis and moderation in the market was long overdue,” said Finance Minister Carole James.

Based on the data collected from the first year, the government says the tax is working as it was designed to — capturing speculators, foreign owners and people who own vacant homes.

The next phase of the tax brings:

  •  An exemption for property owners who are members of the Canadian Armed Forces while in active service and their spouses.

  • An exemption for people who own properties which are only accessible by water. 

  • An end on Dec. 31, 2019, to the exemption for foreign owners of vacant land.

The exemption for empty strata properties in buildings where rentals are banned will be phased out by Dec. 31, 2021.

A strata title allows individual ownership of part of a property — generally either an apartment or townhouse — with shared ownership in the remainder of the building.

Under the new rules announced Tuesday,  if the strata lot remains unoccupied, even if the building’s bylaws prohibit rentals, the tax will be levied.