If you’re a first time home buyer in BC and looking for down payment information then you’ve come to the right place! This blog goes through the basics of a down payment and what to expect when buying your first home.
What is a down payment?
A down payment is the amount of funds that you as a buyer put towards your home’s purchase. In a real estate transaction, the purchase price less the amount of your down payment will be funded by a mortgage.
What is a deposit?
The deposit is the amount of money that is paid once a real estate transaction goes firm (subject removal completed), that is held in trust as collateral in the case that you do not complete on the purchase. The deposit forms a part of the down payment.
What are the minimum down payment rules in BC?
The updated rules as of February 2016 for the minimum down payment in Canada are as follows:
- If the purchase price is less than $500,000, the minimum down payment is 5%.
- If the purchase price is between $500,000 and $999,999, the minimum down payment is 5% of the first $500,000, and 10% of any amount over $500,000.
- If the purchase price is $1,000,000 or more, the minimum down payment is 20%.
Some examples of minimum down payment rules are as follows:
Example Minimum Down Payment BC #1: A home that is worth $500,000
- Therefore, numerically the minimum down payment on a $500,000 purchase price is $25,000.
Example Minimum Down Payment BC #2: A home that is worth $900,000
- Therefore, on $900,000 purchase, you would pay $25,000 to cover the minimum for the 1st $500K, and then $50,000(10%) for the amount between $500,000 and $1M (10% of $400,000).
- Total $65,000 as a minimum down payment for a home purchased for $900,000.
Example Minimum Down Payment BC #3: A home that is worth $1,200,000
- For example, on a purchase of $1,200,000, the down payment of 20% would be calculated on the entire balance – not on a sliding scale.
- Total minimum down payment in this scenario is $240,000.
When is a down payment due?
The down payment is due at the time of completion, as these are the funds used to purchase the subject property.
This is different from the deposit, which is typically due within 24 hours of subject removal.
If you’re looking for important information on the difference between a deposit and down payment, then check out this blog: Deposit vs Down Payment
Is the BC HOME Partnership program still available in BC to first time home-buyers?
The BC HOME Partnership Program, a program that assisted qualifying first time home buyers with their down payments, has been removed and is no longer available. (updated June 2018)
Are there other first time home buyer programs offered to the government available to me?
Yes, there are other programs available to help home buyers (some specifically for first time home buyers) – but not similar to the BC HOME Partnership Program.
Property Transfer Tax Exemption
If you are a first time home buyer that is planning on using the home as your primary residence and purchasing a home for less than $500,000 then you may be eligible for a full exemption of the property transfer tax.
The property transfer tax breakdown is as follows:
The property transfer tax rate is:
- 1% on the first $200,000,
- 2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000,
- 3% on the portion of the fair market value greater than $2,000,000, and
- if the property is residential, a further 2% on the portion of the fair market value greater than $3,000,000 (effective February 21, 2018).
While the full exemption is only available up to $500,000, there are also partial exemptions up to $525,000. To qualify for a full exemption, at the time the property is registered you must:
- be a Canadian citizen or permanent resident
- have lived in B.C. for 12 consecutive months immediately before the date you register the property or filed at least 2 income tax returns as a B.C. resident in the last 6 years
- have never owned an interest in a principal residence anywhere in the world at any time
- have never received a first time home buyers’ exemption or refund
RRSP Home Buyers Plan
The Home Buyers’ Plan (HBP) is a program that allows you to withdraw up to $25,000 tax-free in a calendar year from your registered retirement savings plans (RRSPs) to fund your down payment for a purchase. This money can be taken out tax free, but it needs to be repaid back in to your RRSP within a 15 year period.
Keep in mind that the money must be in your RRSP for at least 90 days before the purchase of your house for it to be valid.
If you’re interested in learning more about the real estate process and are looking for a realtor to guide you through your first home purchase, then give us a call at 604-765-0376. Prefer text? 604-319-0200 or email [email protected] to start a conversation. We’re here to help.