Buying a Home in BC

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Buying a Home in BC

As a purchaser buying a home in BC for the first time, there are two main government incentives that you can take advantage of when buying a home. In this infoletter we provide you with some information on the property transfer tax exemption and the RRSP Home Buyers Withdrawal plan.

The First Time Home Buyers’ Program reduces or eliminates the amount of property transfer tax you pay when you purchase your first home. 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.

To qualify for a full exemption, you must meet the following criteria:

  1. Be a Canadian citizen or permanent resident.
  2. Have lived in B.C. for 12 consecutive months immediately before the date you purchase the property or filed at least 2 income tax returns as a B.C. resident in the last 6 years.
  3. Have never owned an interest in a principal residence anywhere in the world at any time.
  4. You have never received a first time home buyers’ exemption or refund and the property must:
    • be located in B.C.
    • only be used as your principal residence
    • have a fair market value of $475,000 or less and be 0.5 hectares (1.24 acres) or smaller. You may also apply for partial exemptions if you don’t meet all of the above criteria.

There are other details with the property transfer tax exemption that are omitted here for brevity. You should contact your notary or lawyer to confirm any exemption that you may qualify for.

The Home Buyers’ Plan (HBP) is a program that allows you to withdraw funds from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. You can withdraw up to $25,000 in a calendar year.

Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You will have to repay an amount to your RRSPs each year until your HBP balance is zero. If you do not repay the amount due for a year, it will have to be included in your income for that year.

Here are the conditions you must meet for this program:

  1. You must be considered a first-time home buyer. You are not considered a first-time home buyer if, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the date of withdrawal, you or your spouse or common-law partner owned a home that you occupied as your principal place of residence. If, at the time of the withdrawal you have a spouse or common-law partner, it is possible that only one of you will be considered a first-time home buyer.
  2. You must enter into a written agreement to buy or build a qualifying home for yourself, for a related person with a disability, or to help a related person with a disability buy or build a qualifying home. Obtaining a pre-approved mortgage does not satisfy this condition.
  3. You must intend to occupy the qualifying home as your principal place of residence no later than one year after buying or building it. If you buy or build a qualifying home for a related person with a disability, or help a related person with a disability buy or build a qualifying home, you must intend that that person occupy the qualifying home as his or her principal place of residence.
  4. In all cases, your repayable HBP balance on January 1 of the year of the withdrawal must be zero. You should contact CRA or your RRSP provider to confirm you qualify for a Home Buyers Plan withdrawal.

Important Reminder Regarding Your Mortgage Renewal

If your mortgage is up for renewal and you are being contacted by your lender to early renew before the maturity date please call or email us before signing the renewal. We are able to give you a quick recap of rates in the market to make sure you aren’t signing for a rate/term that isn’t beneficial for you. Often times your lender will tell you that you only have a very limited time to sign the renewal to pressure you into taking the rate they want. Get in touch with us for a quick 2nd opinion!

If you require any further information regarding this article or any other mortgage matters please contact our office at 604‐556‐3893. Also, as a reminder to anyone looking for a mortgage, we offer 4 month pre-approvals at no cost to you. This means that you can get a rate hold for up to 4 months to protect yourself in case rates rise.

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About the Author:

Alex Kotai
Alex Kotai has worked in the mortgage lending business for over 10 years. His career started at HSBC Bank Canada where he spent most of his time in senior management roles which involved training and managing the sales staff at his branch. After leaving HSBC, Alex decided to open his own mortgage brokerage firm, Your Mortgage Source. Through his company, Alex has access to many lenders across the country with a very expansive list of products.