The following article is a guest post by Brennan Valenzuela, a writer for Ratehub.ca, a website that allows people to compare Canadian mortgage rates. It also features a comprehensive education centre to help address common first-time home buyer questions. Ratehub is a great source for all the latest Canadian mortgage news.
“Market conditions are improving province-wide as a result of a combination of downward movement in the number of homes for sale and an upward trend in consumer demand.” – Cameron Muir, BCREA Chief Economist
The condo market in BC was buzzing last year, particularly in Vancouver where the average price of an MLS-listed high rise condo unit sat just above half a million dollars according to this Vancouver Condo Report. Multi-unit developments will continue to remain popular in 2012. Using a Vancouver condo listing search on BuzzBuzzHome, you’ll find 140 units either under construction or currently in pre-construction in the Vancouver area.
According to the CMHC, the average residential home price in BC is forecasted to be $564,900 in 2012. However, home prices will differ from region to region. For example, as indicated by BCREA numbers from last December, the average home price in Kamloops was $293,282, whereas the Greater Vancouver Area was more than double that amount, at $689,057.
A healthy market for sellers can translate to a more costly market for buyers, especially the cash-strapped first-time home buyer. When looking at what you can afford, particularly when approaching the upper limit, it’s important to take into account all costs from the mortgage and beyond.
Mortgage rates in BC
Now is a good time to acquire a mortgage because of the low rate environment. BC mortgage rates are at historic lows. The current 5-year fixed rate can be had for a Canadian record low of 2.99%. For those looking for long-term rate protection, the 10-year fixed rate in BC is also at a record low of 3.89%.
Additional purchase costs
The purchase costs of a home extend beyond the mortgage financing. There are numerous fees and taxes that need to be considered in addition to the cost of the property. So whether you’re after a house in Victoria with ocean views or a condo in downtown Vancouver, you need to prepare for the following necessary costs before you sign on dotted line.
BC land transfer tax
Land transfer tax is the provincial tax charged during the registration of a property at the land title office. The amount of tax due is based on the fair market value of the property and is two-tiered. The tax rate is 1% on the first $200,000 and an additional 2% on the portion above $200,000. A full land transfer tax rebate is available for first-time home buyers for home purchased up to $425,000. A partial rebate is available for homes greater than $425,000 up to $450,000. This is sometimes referred to as property transfer tax.
Whether you are selling or purchasing a home, a buyer will need the services of a real estate lawyer to handle all the necessary legal paperwork. In most cases, the down payment will be submitted by your lawyer in addition to other closing costs such as title insurance. Title insurance, although not mandatory, protects you against challenges made against the ownership of your home or title.
Unless it’s your desire to be the next guest on “Holmes on Homes”, it’s best to get a home inspection in order to detect any property flaws. Understanding the condition of your new home is important and a home inspection will help identify the areas of concern; otherwise, learning the hard way could get expensive.
On high ratio mortgages, where you need to borrow more than 80% of the value of the property, CMHC insurance is required to protect lenders from you defaulting. The cost of the insurance is rolled into the mortgage amount; however, the tax on the CMHC insurance is due at closing.
Almost every lender will require you to have insurance protection against property damage. This cost will need to be in place by closing day at the latest.
HST on new homes
Buyers of newly constructed homes in BC are subject to the HST rate of 12%. It should be noted that the introduction of the HST was not received well in BC. British Columbians welcomed the new tax with as much warmth as a hockey playoff loss. That being said, the HST is likely to be lifted sometime in the next one to two years following the success of the anti-HST referendum, where 55% of B.C. residents voted to scrap it. Until then, BC offers an HST rebate for new homes equivalent to 71.43% of the provincial portion of the HST, for a maximum rebate of $26,250. It is available on the first $525,000 of property value.
Although there are many costs involved with purchasing a home in BC, there are also opportunities to recoup some of your money through such programs as the First-time Home Buyers’ Tax Credit, which allows you to reclaim up to $750 on your tax return, in addition to the rebates listed above. The BC land transfer tax rebate may be calculated using the Ratehub calculator.
These rebates and credits were put in place to ease the financial burden of the home buying process and should be taken advantage of where applicable. Otherwise, a home buyer unprepared to deal with the necessary purchase costs may find themselves in between a rock and a hard place and nowhere to live.
And those awesome developments you’re seeing renderings of? Here’s a list of a few of the favourites we included here:
- Anderson Walk in North Vancouver by Polygon Realty
- Lido by Bosa Properties
- Academy by Polygon Realty
- Telus Garden by Peterson Group and Westbank