When you make the exciting decision to buy a house, it is important to know what to expect from the time you start the house hunt until you hold the keys. Buying your first home can be daunting, but here are a few tips to help get you started.
- Build Your Team: The key is to assemble a team that will work together to help you get through each step of the process. Talk to your bank or mortgage broker to find out about financing. Find a realtor that understands what you need and knows the areas you are interested in. Contact your law firm- the earlier, the better. Generally real estate contracts include a subject condition that gives buyers time to have the property’s title reviewed. This is the ideal time to contact your lawyer so they can help ensure the property meets your needs.
- Understand Property Transfer Tax: This tax is charged on every transfer of freehold title in B.C. It is calculated as 1% of the first $200,000 and 2% of the remainder of the Purchase Price. As a first time home buyer, you may be eligible for an exemption if you and the property meet specific qualifications. The Buyer must:
- not have owned an interest in a principle residence anywhere in the world;
- be a Canadian citizen or permanent resident;
- have continuously resided in BC for at least one year prior to purchasing or filed at least 2 income tax returns as a BC resident during the last six years; and
- not have previously received this exemption or refund.
The property must:
- be used only as your principle residence;
- have a fair market value of no more than $475,000; and
- be 0.5 hectares (1.24 acres) or smaller.
Partial exemptions may be available for properties that are larger, have more than the principal residence on the land, or cost less than $500,000. To keep this tax exemption, Buyers must move into the home within 92 days of closing, and continue to occupy the home as your principle residence for the remainder of the first year. Discuss the exemptions with your lawyer, as a false declaration can result in a penalty of double the tax payable.
- Decide How to Own: If more than one person is buying the property, you will need to determine if you will hold title to your home as joint tenants or tenants in common. Joint tenancy means that two or more people own equal undivided portions. When one person dies, the property is transferred to the survivor, without becoming part of the deceased person’s estate. Tenants in Common mean two or more people own different proportions of the property, not always divided equally. If one tenant in common dies, that person’s share of the property becomes part of the deceased person’s estate, subject to probate fees and distributed to the beneficiaries.
- Arrange for Home Insurance: Under the standard Contract of Purchase and Sale, the Buyer becomes liable for all risk in the property as of 12:01am on the closing date. Having home insurance prior to closing is a mandatory requirement for every residential mortgage, but it is good practice for all homeowners to consider. Make these arrangements and advise your lawyer of the insurance company you are using.
- Account for Disbursements: Prior to closing, your lawyer will tell you the final funds required to close. This will take into account your deposit paid, any mortgage funds to be used, property transfer tax amounts, and adjustments for property taxes, utilities and strata fees (if applicable). Don’t be surprised by the disbursements. These are fees your lawyer incurs on your behalf for items such as obtaining title insurance, strata documents, municipal tax information, and Land Title Office fees. The total amount of these fees is dependent on the specifics of your transaction. However, you can refer to our firm’s Closing Cost Calculator for an estimate of what to expect (pihl.ca/closing-cost-estimator).
The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional.The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional.