Property Transfer Tax
Everyone who purchases property pays property transfer tax upon registration of title.
“Effective September 17, 2018, under the Information Collection Regulation, individuals with a significant interest in a corporation or trust that acquires property may need to be identified on the property transfer tax return.” (according to www.2.gov.bc.ca).
You can find out more information on what you can expect to pay, including foreign investors tax, how to file an appeal, and tax rates HERE.
BC Speculation Tax
Changes to the speculation tax were announced in March, 2018, and will be applied on properties that are not the primary residence of the owner. Properties left vacant will be taxed retroactively to Jan, 2018:
- The full rate of 2% for foreign property owners.
- A middle rate of 1% for out-of-province owners.
- 0.5% for British Columbians who own multiple properties but don’t rent them at least six months of the year.
Areas hit with the punitive tax include:
- Metro Vancouver (not Bowen Island),
- Abbotsford, Chilliwack, and Mission, (not Cultus Lake),
- Victoria and the Capital Region (not the Gulf Islands and Juan de Fuca),
- Kelowna and West Kelowna and Nanaimo-Lantzville
View a map of taxable areas.
There are still many questions around the Speculation Tax which the BC government promises to address soon, but if you do have questions now you can contact your tax advisor.
Stress Test & Mortgage Rates
Since new stress test rules came into effect, first-time home buyers and those looking to renew their mortgages with a different banking institution may have felt frustrated when it came time to meet with lenders. Even those who didn’t need mortgage insurance found their finances had to be stress tested at higher rates.
Mortgage rates also climbed this year making it more challenging for mortgage shoppers. Talk to your bank, credit union or mortgage broker for the best rates.
Insured vs. Uninsured Mortgages
Mortgage loan insurance protects the lender should a consumer default on a mortgage (different from the mortgage life insurance that protects your real estate). In Canada, this insurance is offered exclusively through the Canada Mortgage and Housing Corporation (CMHC). However, the cost is passed down to consumers.
Most lenders require consumers to get mortgage loan insurance if making a down payment that’s less than 20% of the home’s purchase price.
In 2016, the federal government made a few changes to the rules affecting insured mortgages:
- Increased minimum down payment to 10% (up from 5%) on the portion of mortgages that exceed $500,000 but are less than $999,999.
Required homebuyers who are applying for a fixed mortgage with a term of 5 years or more to also qualify for the Bank of Canada’s 5-year benchmark rate or the contractual rate plus 2 percentage points (whichever was higher).
- The insurance premium is a percentage of a home’s purchase price, but that percentage is determined by the size of the down payment. The cost of insurance can be in the thousands of dollars. CMHC provides an easy-to-use calculator for determining your premium.
Uninsured mortgages were becoming more popular, as buyers tried for a down payment of 20% or over to avoid the extra insurance cost, but this could also mean more risk for lender and consumer.
With the stress test affecting more borrowers, it means purchasing power may be reduced, and buyers must be more realistic when investing in property.
Make sure you shop around for a mortgage and take time to ask questions and do your own investigations around regulations and taxes.
The changes that have been introduced over the past couple of years were intended to protect consumers and lenders, and cool the market to allow for more affordability. Taking a more cautious and creative tact to real estate investment is always good advice.