Don't forget about the taxes!

Just as you're getting swept up in the fun and excitement of buying a home, your REALTOR® will sit you down for a frank talk about "closing costs," the extra charges and taxes you'll have to pay on top of the purchase price of your home.

The heftiest of these is usually the Property Transfer Tax, or PTT, but the good news is that most first-time buyers are exempt from the tax. The Property Transfer Tax is a tax paid to the British Columbia government by the purchaser of any piece of real estate in the province. It's calculated at 1% of the first $200,000 of the purchase price, plus 2% of any remainder. For example, on a $400,000 home, the PTT totals $4,000. You will need to complete a Property Transfer Tax Return, which your lawyer or notary public can assist you with. The tax is payable on the date the property is transferred at the Land Title Office.

The First Time Home Buyer's Exemption

First-time buyers are exempt from the PTT, but only if all the following conditions apply:

• The home was bought for less than $425,000. There is a partial exemption for homes priced up to $450,000.
  
• The amount borrowed to finance the home must equal 70% or more of the purchase price, and cannot include amounts borrowed from relatives or friends.
  
• Each purchaser must be a Canadian citizen or permanent resident and must have resided in B.C. for 12 months prior to the purchase.
  
• Each purchaser must not have owned an interest in any principal residence at any time in the past.
  If the property purchased is vacant land, construction of a residence must be completed within the year following registration of the purchase.
  
• The mortgage must have a term of at least one year following the completion date of the purchase;
  The purchased property must be classified as residential by the British Columbia Assessment Authority and the land portion must not exceed 0.5 hectares (1.24 acres) in area.
  
• During the first year of ownership, the Purchaser cannot reduce his/her mortgage balance by any more than $11,000 ($9,000 if property is outside the CRD or the lower mainland).
  
• The purchasers must occupy the property as a principal residence within 92 days of the completion date, and for a minimum of one year afterward.
  
• There are a few other complex conditions governing PTT exemptions, but they don't affect most home buyers. Your conveyancer can supply you with complete details.

The British Columbia Real Estate Association (BCREA) and other industry groups are lobbying the government to eliminate the PTT. A recent study determined that eliminating the PTT would, over a ten year period, allow 9,623 more households to purchase a resale home and 4,403 more households to purchase a new home.

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