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Understanding the HST Costs for Closing an Investment Property

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Closing an Investment Property

 
Many investors who are in the process of purchasing a new home from a builder for income property purposes are not aware of all the closing costs that will be incurred. This can lead to significant financing issues when additional costs are discovered and need to be paid – usually within a week of closing. Most people understand the costs of the home itself and the legal fees associated with closing the sale, but many are not aware of the HST amount that must be paid in full by the date of the final closing when the title is transferred. The amount due on closing for HST typically ranges from $19,000 – 31,000.
 
New homes are typically eligible for an HST New Housing Rebate, which will reimburse the HST amount that is due on the unit. This rebate can typically cover the amount paid for the HST, but it is a relatively new program and many people are not fully aware of it and the rules governing it.
 
If you plan to live in the new property and use it as a primary residence, the builder will typically pay the HST and claim the corresponding HST New Housing Rebate. In the event that you are purchasing the investment property with plans to have it non-owner occupied, you will be responsible for paying the HST in full on the closing date and for claiming the HST New Housing Rebate.
 

Finding Help Closing Your Investment Property

 
As you can see, the process of closing an investment property can get confusing with additional costs potentially leading to financial issues. If you are responsible for paying the HST and there is failure to pay the amount due on the final closing, it can result in a loss of deposit and potential legal action from the builder.
 
Banks and many financial institutions typically do not arrange loans for HST-related tax purposes, but there is professional financial help available to allow investors to secure the funds necessary to pay the HST due at final closing. HST relief companies allow investors to secure a short-term loan to pay for the HST. This may be done by taking an unsecured loan or with a second mortgage against the first mortgage on the investment property for the amount needed for HST (up to $31,000). The company will then take the steps to coordinate and file the HST New Housing Rebate to the Canadian Revenue Agency (CRA) on your behalf.
 

Qualifying for the HST Rebate

 
In order to qualify for the HST New Housing Rebate, there are a few requirements that must be met. These requirements are:
  • Only investment properties that have been purchased from a builder in Ontario will be eligible for the rebate.
  • The property cannot be a primary residence for the owner. Only non-owner occupied properties are eligible.
  • There must be a 1 year (or longer) lease agreement in place with a renter.
  • The rebate must be requested within a period of 2 years of title transfer of the property. This means that investors who have previously closed an investment property can retroactively apply for the HST rebate within the 2 year limitation.
Take advantage of the financial help available to pay your HST amount for successfully closing an investment property today.  

FILING A HST REBATE

I paid HST on the new build condo I bought in the Greater Toronto Area.  how do I file for a HST Rebate?  I believe I can get some of this money back.

Answers

By HST Relief (Admin)
Yes, if you are renting our your new condo, then you will owe a portion of HST on final closing when the building registers.  Keep in mind, you will also owe other money in closing costs such as: development fees, levies, land transfer tax and lawyer's fees.  Then, after closing, you can apply for a HST Rebate to recover the portion that you paid on closing.
 
Give us a call if you have specific questions about how much you will owe and if you are eligible to get the HST rebate.
 
Our company, HST Relief, offers 2 main services:
 
1) We provide loans to clients like you who will owe HST on closing.  The short term loan covers the HST amount due on closing and then we pay it off when the HST rebate comes in about 45-60 days after closing.
 
2) We also provide a rebate filing service, where after closing, we will file on your behalf to recover your HST rebate and get your money back.
 
Please call us at: 1.866.832.1990 or email us at info@hstrelief.ca if you have questions.

How much HST do you pay on a new home in Caledonia?

I bought a new home in Caledonia, Ontario from a developer called Empire.  It won't be closing for a while, but I want to be prepared with how much HST I will owe on closing.  How much HST does a purchaser pay on a new home? 

Answers

By HST Relief (Admin)
Good question.  The amount of HST due on closing is a portion of the total HST - some is included on the sticker price you sign with the builder and some is due on closing.  These calculations are weighted based on purchase price.  A good estimate for our clients is about 7.8% of the purchase price due on closing if you are not using the new construction property as your primary residence.  For properties over $450,000, the amount of HST due on closing will be $24,000.
 
If you are concerned about being able to the pay the HST on closing, please inquire about our HST loan service.  We will cover the HST due on closing for the client and then file to get the HST rebate to pay off the loan.  It works as a sort-of short-term bridge financing until you are issued the HST rebate from CRA.
 
We also offer a HST Rebate filing service to get your money back after closing.
 
Call us for more information: 1.866.832.1990. or email us at: info@hstrelief.ca
 
 

Is there HST on resale real estate purchases?

Hello - I am thinking of buying a house on my street in Etobicoke as an investment property.  How much HST will I owe if I make this an investment rental property?  Thanks.   

Answers

By HST Relief (Admin)
Since July 2010, HST has been applied to the sale of NEW residential housing and condos.  HST does not apply to resale properties.  In the case that you are looking to purchase a resale house on your street as an investment, you will not be charged HST upon closing.

HST implications for new construction summer home purchased in Muskoka

I purchased a summer home in Muskoka and it is now in construction.  I ha​d signed the Purchase Agreement back in 2013 with a clause stating that it would be my primary residence, however, it will not be my primary residence.  We intend to use it as a cottage. Will I owe HST upon closing? And, will I qualify for the HST rebate if I use this new construction property as a cottage? Many thanks.

Answers

By HST Relief (Admin)
Hi Verona, we would strongly advise you to correct the affidavit you signed with the builder, letting them know that it will not be your primary residence.  
 
If a new construction property is used as a primary residence by the purchaser, the builder will pay the HST on closing and have you sign over the rebate to them. However, over the last couple of years, CRA has determined that a high percentage of purchasers are falsely claiming primary residence in new construction properties to avoid the cost and the hassle of HST.  If you are audited, you will be slapped with fines.  It's simply not worth it.
 
If you purchase a new construction property as an investment, you are required to pay the portion of HST upon closing.  If you have a 1 year lease in place with a renter, you qualify for the New Residential Rental Property Rebate and you can get back the HST you paid on closing.  However, if you are using the property as a recreational property, such as a cottage in Muskoka, and do not have a 1 year lease with a renter, then you technically do not qualify for the HST rebate.  Take CRA's rules and regulations into serious consideration while planning the closing of your new construction property.       

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