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How HST Closing Costs Can Threaten Your Investment Property Closing

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HST Closing Costs for Investment Properties

 
Real estate continues to be an attractive investment for many in Ontario. Whether it is residential homes or condominiums, investment properties are gaining popularity as investment opportunities. This is especially true for new build properties.
 
With the number of investors increasing, many "first time” investors are becoming familiar with the different closing costs that occur with an investment property. Many of these closing costs are similar to those that come with purchasing a residential property for personal use. One of the major differences between purchasing a new build investment property from the builder is the responsibility of paying the HST.
 
HST closing costs for new build properties are often a source of frustration for many purchasers. There is a lot of confusion surrounding whether HST is due, and who is responsible for paying it. For investors purchasing a new build property from a builder, the purchaser will be responsible for paying all of the HST due on the sale of the property. This amount of HST will have to be paid in full on the final closing date of the sale of the property before the transfer of title. A failure to pay the HST by the final closing can jeopardize the entire closing.
 

Meeting the Closing Requirements

 
Even the most savvy investors can be surprised to find out that they are responsible for paying the HST on new investment properties. In some instances, investors may not become aware that the HST needs to be paid until just days before the final closing, usually by one’s solicitor. The HST due at final closing is typically $19,000 - $31,000; significant amounts of money, which can destroy even the best budget for closing costs if the HST is not planned for.
 
There is an HST New Housing Rebate available from the Canadian Revenue Agency to provide a refund for the amount of HST paid for new investment properties. While this rebate can remove some of the sting from paying the HST on the investment property, applications cannot be filed for the rebate until after the final closing as long as a number of terms are met.
 
The time between when the HST is due and the time when the HST rebate is received leaves many investors looking for viable financing to effectively bridge this gap.
 

HST Rebate Loans

 
Despite the growing need for this source of unexpected financing, the major banks typically do not provide the type of short-term loan that is necessary under these circumstances. An HST relief company specializes in providing HST Rebate Loans to qualified investors.
 
Investors who maintain an acceptable credit and debt ratio may be able to secure the money necessary to pay the HST in the form of a second mortgage on the investment property. The investor is responsible for paying the fees to arrange the loan as well as the interest that is accumulated until the HST rebate is received.
 
The top HST relief companies will also provide services for filing the HST New Housing Rebate application on the investor’s behalf.
 
Don’t let the HST closing costs threaten your investment property final closing. Take advantage of the professional HST relief services available today.

Home bought for an investment and HST in Ontario

My question is - is the HST due for new construction only apply to new condos or also applies to a home that I bought as an investment?  The home is not in Toronto but in Barrie and is new construction.

Answers

By HST Relief (Admin)
Yes, HST is applied to all new construction real estate in Ontario.  The same amount of HST is due whether or not you have purchased a new construction condo, townhouse or house anywhere in Ontario.
 

Who pays the HST on a home purchase?

Who pays the HST on a home purchase?
My question is - how is responsible for paying the HST on a new home purchase? How do I reclaim back the HST through a government program?

Answers

By HST Relief (Admin)

In short, part of the HST is built into the purchase price and part of the HST is due upon final closing.  If the purchaser is using the new construction property as a primary residence, then it's a wash.  There is no additional portion due on closing.  If the purchaser is not going to be living in the residence, but renting it out or using it for any other purpose, then this purchaser should expect a bill of $17,000 - $29,000 due on final closing and registration. 

 
The good news is that you can get this HST paid on closing back through a government rebate program with CRA.  There are 2 parts to the filing and it comes with a 74-page manual.  Certain supporting documents have to be submitted properly as well.  At HST Relief, we are an award winning team that specializes in these rebates.  Call us to put together your filing to ensure that you receive your rebate in a timely fashion.  We also offer loans for the HST rebate amount due on closing, a service that the major banks are not mandated to lend for (tax-related purpose).  Call us if you need help financing your HST.
 
1.866.832.1990  or   info@hstrelief.ca
 
For more details on how this works, check this article here:  http://engage.hstrelief.ca/engage/how-does-hst-work-for-new-properties-1000.

Brampton house and HST

Can you help me with my HST paid?  I bought a Brampton house with the intention of moving there with my wife.  I told my lawyer that I would move there on closing, but after the closing date, we decided not to.  Instead, I rented it out for a hefty amount.  I was claiming the rental income on my last T1 General and when it was submitted, CRA found out that I was not living in the place.  They are now asking for $24,000 plus interest to be paid  in HST.  What are my recourses here?  Thank you sir.

Answers

By HST Relief (Admin)
Yes, CRA will come back and ask you to pay HST if they find out that you purchased a new build, new construction property and did not move into it as our primary residence.  Sometimes, there are thousands of dollars in fines associated with this offense too.  Luckily, we can reclaim the bulk of the HST amount you paid ($24,000 for properties over $450k) by filing for the New Residential Rental Rebate program with a 1 year lease.
 
We provide our clients this filing service.  Please call us at 1.866.832.1990 or email us at info@hstrelief.ca.  We'll collect your documentation, put together your filing and have CRA mail or direct deposit you your refund within 45-60 days.

Does HST on new real estate apply outside of Toronto?

Hi,
 
I am actually thinking of buying a preconstruction investment outside of the GTA near Barrie.  Will I have to worry about HST up there, or only if I was purchasing in Toronto?

Answers

By HST Relief (Admin)
Hi Michael,
 
HST is applied to all new construction real estate purchased throughout Ontario.  Whether you purchase in Toronto, the GTA or somewhere more remote in Ontario, the same HST rules will apply.
That is, if you are purchasing new construction but will not be using it as a primary residence, you will owe a portion of HST (the portion that has not been built into the purchase price) on final closing.  This is usually in the range of 7-8% of the purchase price listed on your Purchase Agreement with the builder, but varies depending on the purchase price.  If you will be using it as a primary residence, the builder will file for the HST New Housing Rebate and you are credited on the Trust Ledger from the builder and won't owe anything additional on final closing.    

Why does the government in Canada and CRA make investors pay HST on new properties?

Why does the government in Canada and CRA make investors pay HST on new properties?
Thanks for answering my last question so promptly, HST Relief!  My next question is: If the government is just going to give me my money back anyway, why is CRA demanding that this rebate-able portion of HST is paid upfront on closing? 

Answers

By HST Relief (Admin)
Good question.  The biggest reason that CRA requires a portion of the HST to be paid upfront, while turning around to rebate the investor a short time later (under the New Residential Rental Property Rebate), is to dissuade investors from buying properties and then flipping them shortly after they close.  You must have a 1 year lease in place with a tenant or renter in order to qualify to get your HST back.  Also, the CRA has the right to claw back and ask for the HST back if an investor who received their rebate sells within the first year of ownership.  The HST program also serves as another way that the CRA can track your investment properties for when it comes time to sell them and claim the gain.   

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