Monday, February 8, 2010

HST on Mortgage insurance premiums

Good day everyone!

I have just received a little bit of good news regarding the upcoming tax hike known as the HST.

Although the prices of HOUSING will not be subject to HST, unless the purchase price is above $400,000, and the home is new, many Real Estate Transaction related services will be subject to this new "value-added-tax" (whatever the hell that means). Examples of services that will be subject to a new 13% tax rate (formerly 5%... GST only) are Commissions, Home Inspection Fees, services such as plumbers, electricians, stagers, etc.

Here's some GOOD news. Many of my clients are buying their first home. Even after saving for years, it is difficult for people to come up with a 20% downpayment on a house. If you require a mortgage with less than 20% down, you will need to be approved, and pay for, MORTGAGE INSURANCE. Commonly sold to you by CMHC (Canadian Mortgage and Housing Corporation), or Genworth Financial, this insurance covers the bank against any losses stemming from your inability to pay for the house you've purchased. You MUST have mortgage insurance if you have less than 20% down.

Anyway, traditionally, this mortgage insurance is charged as a percentage of your purchase price, and is added to the mortgage principal and paid through the duration of the mortgage.

This mortgage insurance premium amount is currently subject to PST, and taxes would be paid on it at a rate of 8%. These taxes CANNOT be added to the mortgage, and MUST be paid to your lawyer as a part of your "adjustments." Typically a few hundred more dollars you need to come up with to get your deal to close.

The GOOD news is that this particular service is NOT going to be taxed at the new Harmonized rate of 13%. It will remain at 8%.

A small break, for now, courtesy of your wonderful government.

If you have more questions about this tax-grab, and it's impact on your upcoming home purchase or sale, don't hesitate to contact me, and we can figure out your tax-mess together!

Ben Sage, Sales Representative. My Personal Website Re/Max a-b Realty Ltd., Brokerage. 519-536-7535. 521 Dundas St., Woodstock, ON

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