There are lots of new developments around Calgary, from Setton and Waldon in the deep SE, to Airdrie and Cochrane just North and NW of the city, and Aspen in the West. If you are considering purchasing a new home, here are a few things to be aware of.
Sometimes a newly built home is purchased directly with a sales person at the developer’s office or with the developer’s Realtor. It’s important to be fully aware of the contract you are signing when you purchase a newly built home, and having a realtor of your own will help you stay fully informed and avoid any misunderstandings.
GST (Goods and Services Tax)
Goods and Services Tax is 5% in Canada and is payable on the purchase of a new home. Pay close attention to the contract price on your new home, because most of the time GST is excluded from a home’s purchase price, and you will need to pay an additional 5%. However, if the purchase price of your home is under $450,000 and your primary residence, then you may be eligible to receive a tax rebate. The rebate is equivalent to 36% of the GST amount. After the rebate is deducted, the new purchase price is set as the Net of GST. Your mortgage broker will be able to calculate this amount for you.
Interest rates can change from the time you buy your home and the time it is actually completed; therefore, you may not know the actual fixed costs of your mortgage until long after you have signed your purchase agreement and paid your deposits. A rate hold can help secure an interest rate for you for a while, but things can still change in the market and with financing rules. Keep in touch with your mortgage broker and review everything a month or so before your completion date.
Allowances and Discounts
Often times builders will give incentives to upgrade your home finishings, develop your basement, or build a garage or fence. Some of these items are included in the purchase price at no extra cost, and some of these items may not be included. Your agreement will clearly outline the details of allowances. If your contract outlines allowances as a credit with a cost value then this is considered a buyer credit and the amount on the contract will be deducted from your total purchase price. You, the buyer, will be responsible for additional costs associated with upgrades that go above and beyond the stipulated allowance price.
It takes time for a builder to apply to the city for occupancy permits, and for the city to determine the appropriate property tax on newly built homes. Most lenders often estimate property taxes based on a percentage of a home’s purchase price. Estimated property tax can range from 0.5 – 1.75% of the purchase price, and can make a substantial difference on what you may or may not qualify for. AC Lending works with you to identify and select the best financing solution for your situation.
Condo Fees Begin Low and Grow
New condominiums set their condo fees low to start with and increase them over time. When you make an offer to purchase a condo or townhouse, the condo fees will be quite low until the council has had time to set up their operating budget. Remember to plan and budget for an increase in condo fees if you are purchasing a new condo or townhouse.
On occasion, a buyer may change their mind and decide not to complete the purchase of their home that is under construction. In this event, the property can be assigned to a new buyer and the price may be adjusted. If the home’s purchase price is lower or higher, the GST on the original purchase price will still stand. The property purchase transfer tax will apply to the new purchase price. The final property purchase transfer tax will be determined depending on the details of the transfer, and the value of the property within limits for exemption as typically set out by the provincial government. For financing purposes, not all lenders will consider an assignment as the new purchase contract is between the original buyer and the new buyer – not the developer. Some lenders will only consider the original price and the new buyer will have to pay the difference as part of the down payment to complete the purchase.
There are many things to consider when purchasing a new home, let AC Lending help answer your questions and get you into the right home.
Based on Things to Consider When Buying in a New Development by Pauline Tonkin