Archive For The “Real Estate Law” Category

FASTHelp – Property Transfer Tax

FASTHelp

Property Transfer Tax – Is it too high?

This tax was brought in by the British Columbia government in 1987. It was introduced in an attempt to slow down the speculation (house price inflation) in real estate that was happening at the time. Subject to a few exemptions, the tax is payable by anyone who purchases property.

Until February 2016, the amount of tax was 1% of the first $200,000.00 of the purchase price, and 2% of the purchase price over $200,000.000. However, when the tax was first brought in, the average home price in Vancouver was $147,000.00. The idea was that by increasing the tax to 2% for values over $200,000.00, speculation would be reduced and home prices would be kept down.

There is also a first time home buyers exemption, but it is only for homes under $250,000.00. for properties in the range of $250,000.00 to $450,000.00, there is a partial exemption. For properties with a value greater than $450,000.00, the first time homebuyers exemption is forever lost.

Homeowner Tax Concept

Property Tax

 

There have been some changes effective February, 2016. As of February, the amount of tax is 1% on the first $200,000.0, 2% on the amount between $200,000.00 and $2,000,000.00 and 3% on the amount over $2,000,000.00. There is also a new exemption for newly built homes. It has no application to used residential housing or to newly built homes with a value over $800,000.00.

What most people do not realize, is that the percentage rates for properties under $2,000,000.00 have not been adjusted since 1987 (except for a few minor increases in the first time home buyers exemption). 

So, as a result, when the tax was first introduced, the vast majority of home buyers paid only 1% of the purchase price as tax. Also, the vast majority of first time homebuyers were exempt from the tax (since so many homes were under $250,000.00). In 2015, the vast majority of home buyers are paying 2% tax on most of the purchase price, and very few first time home buyers qualify for the full (if any) exemption. The “new” 3% tax on properties over $2,000,000.00 is (as it was in 1987) a further attempt to reduce speculation. However in raising the tax on these values, there was no adjustment made to the 2% payable on houses valued from $200,000.00.

Is that reasonable??

Laima Pakstas

Lawyer

copyright@2016

 

FASThelp: Mortgage terms demystified

 

In this day and age the banks and other financial institutions offer a variety of different mortgages to the home buyer.   The interest rates are just one consideration.   You should also look at whether the mortgage is open or closed, the term of the mortgage, whether the interest rate is variable, and the length of the amortization period, among other things. To help you consider the options, the following is a list of terms commonly used in mortgage descriptions:

Principal:   Reference to the Principal is a reference to the total amount borrowed, or still owing on the mortgage not including interest.

Open Mortgage: If a mortgage is open, the principal and the interest can be paid by you the homeowner at any time without facing any penalties.   Lump sum payments can also be made during the term or life of the mortgage without incurring any additional charges.

Closed Mortgage: This is the opposite of an open mortgage. If the mortgage is paid out prior to the end of the term of the mortgage, the homeowner will likely be required to pay a penalty.   The amount of the penalty will vary depending on the mortgage company you are dealing with.   The details of how any penalties will be calculated must be disclosed to the homeowner before the monies are advanced by the mortgage company.

Term: The term refers to the length of the agreement between you and the bank.   The mortgage  will in all likelihood not be paid in full during the term of the mortgage, but the agreement (that sets out the interest rate; penalties; open or closed) will expire at the end of the term.   At the end of the term, you can either payout the balance due under the mortgage or renew the mortgage for an additional term.  Mortgages are generally offered at 6 month, 1, 2, 3, 4,and 5 year terms. 

Amortization period – The length of the amortization period is the length of time it will take to payout the entire mortgage.

Variable rate –  The interest in this type of mortgage will fluctuate with the changes in the prime rates of mortgages offered by the bank. 

Fixed rate – The interest rate is agreed to at the beginning of the term, and will stay the same until the end of the term.

These definitions are provided to help you begin the process. It is important to ensure that the type of mortgage you select suits your particular needs. In the excitement of buying a new home, it is easy to overlook the details of the financing and focus only on the purchase and perhaps the monthly payments. It is extremely important to consider how long you intend to own the house; whether you require the stability of fixed payments regardless of the variations in interest rates; and how quickly you would like to pay down the amount you have borrowed.

At Dogwood we can help you maneuver through the details of buying your new home. Call us to help you demistify the process.

General Office: 778-410-5090

 

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