Hi guys,

I have question about the investment property I bought investment property from the builder and closing date is in May 2017.

When I bought the investment property, I signed the purchase agreement on regular price. It doesn't include full HST. Sales person informed me I can make change in document anytime prior to 60 days before closing date and declare an investment property. There will be an amendment to purchase price which will include full HST and then it is up to me to take HST refund from government.

Now, I am almost ready for mortgage application and looking for updated price in purchase agreement (I need the mortgage on amount which includes full HST).

I asked my builder to make an amendment and he just keep advising me to talk to you lawyer. Your lawyer can do that. Builder is not ready for making an amendment now.

I have talked to my lawyer and he said he will only get documents from builder's lawyer just few days prior to closing date and the around the same time lawyer wants mortgage documents from my bank too.

Here are my questions:

1) Any alternative for banks to approve the mortgage on full HST price even if purchase agreement doesn't include full HST?

2) Do you think my lawyer can help here to provide some kind of document which will be accepted by bank to approve the mortgage on full HST price?

I would like to apply for mortgage as soon as possible.

Quick response will be appreciated.

Thanks,

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Success is Never Ending and Failure is Never Final.

You have not given any figures for me to work out any calculations on the cost. So, I am as much in the dark as you or your lawyer is, in this instance. So, You will have to put up with the delay or the suspense till the builder makes his final calculations. (Most of the time they will cook their books{fudge} to give you a very clear picture.) Then they stick to those figures, once they give them to you.

They buy their materials wholesale and then fix the cost base on the actual quantity of materials used in your house.

Please read through this and see if it makes more clear to you or you are still lost. It is copied and pasted here to delete all of the pictures etc., But it is also available to you on the web.
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https://springrealty.ca/do-you-have-to-pay-hst-on-a-new-home-purchase/

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What does the HST Rebate mean for house or condo purchases from a builder, and why is the government asking for money back from investors?
HST on New Home Purchase
HST on New Home Purchase

The HST Rebate has been around since mid 2010 since CRA introduced the HST system in Ontario. The rebate is to discount first time home buyers or investors of real estate on the HST portions of their purchase as long as certain conditions are met.

First let’s talk about the discounting element. There are two important factors; GST & Provincial Sales Tax. The GST credit has been around for a long time and hasn’t changed. You are credited 36% of the actual GST (5%) portion paid on a new purchase. However there is a restriction on any purchase over 350,000. The GST credit will start dwindling until it reaches 450,000, where it becomes 0. The Provincial portion (8%) of the tax is a credit of 75% of the actual amount paid capped at 400,000. What this means is that if you buy a property over 400,000 you will still be eligible for 75% of the 8% provincial tax paid.
Let’s look at a couple of examples. Remember we’re talking about NEW houses and condos here, not the resale market. HST does not apply to resale properties.

Example 1
Purchase price of property 350,000 + HST ( GST 17,500 PST 28,000). In this case you’ll be rebated 36% of the GST = $6,300 + 75% of the PST = $21,000 for a total rebate of $27,300. Keep in mind that this rebate is already built into any purchase price you see at a sales office. When you look at the sales sheet you’ll see a sale price of $368,200 (350K + HST – Rebates). The problems come when the proper documentation isn’t filled out and the CRA comes to collect the rebate years later!

Example 2
Purchase price of property 450,000 + HST ( GST 22,500 PST 36,000) Guess what, no GST rebate for you here. Properties over $450,000 are not eligible for the 36% credit so you’re stuck with the $22,500 tax. But you are still eligible for the PST credit. The PST credit is capped at a value of $400,000. Even though 75% of $450K is $36K you are only rebated 75% of $400K = $24,000. When you see this place on the sales sheet you’ll see a sale price of $484,500 ($450K +HST – rebates).

This credit is available for both first time home buyers and those that are purchasing properties as an investment. The only difference is in the forms that have to be filled out for these credits. 99% of the time these rebates are built into the price you see and pay at the sales centre. Since the builder is already discounting this HST rebate on the purchase price of the condo or house, be aware that you are signing this credit over to the builder to get a discounted price on the purchase. Also understand that they can technically do this if your purchase is to be your principal residence. If not, you should be paying full value for the condo and getting the discount later or else you may face problems 2 years later if CRA audits you and notices that the wrong forms were sent in.

It’s very tempting to flip your property with a hot Toronto Market but should you? Investment property owners should be aware that in order for you to keep the HST rebate you must have rented out the property for at least a year. This does not mean from occupancy this means from closing. Recently the government has been asking many investors who purchased properties and flipped them upon closing to pay the HST rebate back, that is a substantial repayment of taxes, just imagine in example 1 above where the total tax rebate was 27,300 to have to pay this back isn’t as simple as cutting a cheque for your average Canadian. Make sure you’re informed about the rules before you make an decision.

Also if the property is your principal residence there is no specific timeline for you to sell and not pay back any of the taxes that were rebated to you but CRA looks at these cases on a case by case basis, if it doesn’t make sense to you it probably doesn’t make sense to them.

The advice is to talk to your accountant when you buy or sell your property, to understand the tax implications both from HST rebates and potential capital gains taxes when the property is sold. This post was inspired by the many clients that have been ill prepared, ill advised by their professional service providers. We trust Grant Matossian, CGA with all of our tax advice. Ask him a question and be prepared for the most detailed answer you’ve ever received. Check him out on Facebook and visit his amazing website. This is one CGA that understands the importance of his online presence.

Hope this helps you a little.

FH.
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Quote:

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Originally posted by meitsme

Hi guys,

I have question about the investment property I bought investment property from the builder and closing date is in May 2017.

When I bought the investment property, I signed the purchase agreement on regular price. It doesn't include full HST. Sales person informed me I can make change in document anytime prior to 60 days before closing date and declare an investment property. There will be an amendment to purchase price which will include full HST and then it is up to me to take HST refund from government.

Now, I am almost ready for mortgage application and looking for updated price in purchase agreement (I need the mortgage on amount which includes full HST).

I asked my builder to make an amendment and he just keep advising me to talk to you lawyer. Your lawyer can do that. Builder is not ready for making an amendment now.

I have talked to my lawyer and he said he will only get documents from builder's lawyer just few days prior to closing date and the around the same time lawyer wants mortgage documents from my bank too.

Here are my questions:

1) Any alternative for banks to approve the mortgage on full HST price even if purchase agreement doesn't include full HST?

2) Do you think my lawyer can help here to provide some kind of document which will be accepted by bank to approve the mortgage on full HST price?

I would like to apply for mortgage as soon as possible.

Quick response will be appreciated.

Thanks,

---

Thanks for quick and detail response.

Sorry. I was not clear. I am not worrying about calculation and rebate. I know that process well.

I am going legal route for declaring investment property, paying full HST to builder and getting rebate from government after fulfilling their requirements (like lease for one year of the tenant etc..)

At this point, I have purchase agreement of regular price ($269900 doesn't include full HST). I have asked builder to make an amendment as mention in my original email and builder is denying at this point. My lawyer will get all paper at the time of closing with full HST (Approx. $20K more) price from builder. That is too late for me to apply for mortgage.

I need mortgage on amount which includes full HST. I want to make mortgage arrangement now or well in advance. Bank is asking for purchase agreement amendment which includes full HST but I do not have right now.

Looking for alternative to get approval of mortgage and finalise. Don't want to wait till closing date.

See my two questions in original post and let me know if you have any idea.

I appreciate your response.

Thanks in Advance

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Success is Never Ending and Failure is Never Final.

It is always very nice and easy to deal with an honest builder and developer. NO Names here. But if you feel that he is not one and not honouring his commitments, then, go see a lawyer who will handle him the way you want him to.

Looks like you are dealing with one who is IFFY and not straight forward. Yet some lawyers will read through the contract and set it straight for you and they know how. So, find one who knows how. Hnag onto the Original e-mail and that will surely help.

There are Desi R.E.Mortgage agents/ brokers who will bend backwards to help you with all of the Paper Work at a short notice and if you have not found one, please post to the board and they all will drop out of the wood work soon enough to help you. I think you are worrying yourself to death over this for not knowing the Mortgage field.

Good Luck in your search. (I cannot post names to this board.)

Yes, it is POSSIBLE. So, search and find one.

FH.

Thanks FH.

I am on the same route.

I have booked an appointment with my lawyer.

Also, I found mortgage consultant who is ready to calculate HST himself and approve the mortgage. Just before the closing date, I need to provide the document of purchase price which includes the HST.

Thanks,

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Success is Never Ending and Failure is Never Final.