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Though homeownership is one of the most exciting and rewarding experiences one
can embark upon, the pressure to achieve the coveted 20% down payment is one
that is felt by many across the country. With the current benchmark in Vancouver
reaching $1.5 million, this equates to a $300,000 deposit, and effectively relegates
many to continuing their rental tenancy. However, relief is available for those seeking to find solutions to the monetary challenges of their initial home purchase.
The First Time Home Buyers Program reduces or eliminates the amount of
property transfer tax one pays when purchasing their 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, the percentage of interest that the
first time home buyer(s) have in the property is eligible.
To illustrate, if you qualify and purchase a property with a fair market value of
$400,000 with a person who doesn’t qualify, you would still qualify. If you register
to own a 60% interest in the property, 60% of the tax amount would be eligible for
To qualify for a full exemption, at the time the property is registered you must:
1) Be a Canadian citizen or permanent resident
2) 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
3) Have never owned an interest in a principal residence anywhere in the world
at any time
4) Have never received a first time home buyers exemption or refund
The property, to be eligible, must:
1) Be located in B.C.
2) Only be used as your principal residence
3) Have a fair market value of $500,000 or less
4) Be 0.5 hectares (1.24 acres) or smaller
You may qualify for a partial exemption from the tax if the property:
1) Has a fair market value less than $525,000
2) Is larger than 0.5 hectares
3) Has another building on the property other than the principal residence
Foreign entities and taxable trustees are not eligible for the exemption. If you are an
individual who doesn’t qualify because you are not a Canadian citizen or permanent
resident, but you become one within 12 months of when the property is registered ,
you may apply for a refund of the property transfer tax after the fact.
How to Apply:
To apply for the First Time Home Buyers Program, select or enter exemption code
FTH on the Property Transfer Tax Return .
After you have applied you must meet additional requirements during the first year
you own the property to keep the tax exemption.
Using your RRSP savings:
You can withdraw up to $25,000 in RRSPs per person in one calendar year without
penalty to buy or build a qualifying home. There are some rules, though:
1) You must wait at least 90 days after your RRSP contribution date before you
can withdraw RRSPs for a down payment.
2) After a two-year grace period, you will need to start repaying the RRSPs you
withdrew. If you don’t repay them within 15 years, the outstanding amount
will be added to your taxable income. This amounts to $1,923 per year after
your two-year grace.
Like many long-term investments, real estate exhibits a natural course that ebbs and
flows. Unlike stock speculation however, the ebb and flow of real estate is far less
volatile, and despite these small fluctuations, it always exhibits a general upwards
trend for those who are willing to play the long game.
We tend to see the market move in 10-year cycles and though we’re in a current
period of price correction with fewer sales, the market will effectively recover and
continue its upward trend as it always has. Sources indicate this could come as soon
as the second quarter of 2019.
What this means is that as prices fall, now is the optimal time to get into the market
and make the plunge into homeownership for those who are on the fence. Always
available for your inquiries, please reach out to the Beyond Properties Group for
solutions to your challenges. Let us help you make your dreams of homeownership