Condo Closing Cost in Toronto
Many investors are taking
advantage of the hot real estate market in Toronto by investing in new
construction condominium units to be used as investment properties. The number
of condominiums being constructed in Toronto is staggering. This is allowing
more investors to continue to purchase newly built investment properties from the
many builders in Toronto.
New construction condos will
require a deposit in order to secure the unit. Expenses that should be budgeted
for a condo closing include the down payment, legal fees for closing as well as
both the Provincial and City of Toronto land transfer taxes. These significant
expenses are all due by the final closing date of the property before the title
of ownership is changed from the builder to the purchaser. Final closing
typically occurs within 6-9 months after the occupancy date of the condo.
One of the expenses that can be
especially confusing for new condo owners is the HST. The rules surrounding the
HST are largely unknown and many people are unaware of the specifics. This is
also true of the HST New Housing Rebate, which has been put in place to help
owners recover the amount of HST that is paid at final closing. Understanding
of the HST requirements and the HST rebate is further complicated due to the
different rules that come into effect, which are dependent on whether the condo
will be owner-occupied or used as an investment property.
Who Pays the HST for New Construction Properties?
The party typically responsible
for paying the HST will differ depending on the intended use of the property
after it changes title.
It is common for builders to
draft an Agreement of Purchase and Sale that does not charge the purchaser HST.
This assumes that the property will be used as a primary residence by the
purchaser; it entitles the builder to receive the HST New Housing Rebate on
behalf of the client.
In the case that the new condo
will not be owner-occupied and will be used as an investment property, the
purchaser will be required to pay the entire HST (typically $19,000 - $31,000)
by the final closing date before the title transfer can occur. Investors that
are unfamiliar with the HST rules will not have these additional costs budgeted
into the final closing costs for the condo. Failure to pay the HST amount due
on the final closing will jeopardize the closing, which can result in the
deposit being lost and possible legal action being taken by the builder.
Financial Help for Paying HST on Investment Properties
The major banks will not provide
specific HST-related loans to help cover these unanticipated costs. Luckily,
there are specialized HST relief companies that will provide HST Rebate Loans
to clients to ensure that the HST can be paid in full and the final closing is
The client will need to be eligible
for the HST New Housing Rebate while also having a credit and debt service
ratio that is within the necessary parameters. The HST Rebate Loan is issued in
the form of an unsecured loan or as a second mortgage. The loan will then be
paid off when the HST rebate is received from the CRA. The HST relief company
may even file the paperwork
for the HST rebate
on the investor’s behalf as a further convenience.
Don’t let unexpected condo closing costs in Toronto
compromise your final closing. Discover how an HST Rebate Loan can help you pay
the HST on your new investment property today.