The HST New Housing Rebate Explained to the Lay Investor

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Are you having trouble understanding how the HST rebate applies to your own real estate investment?
The Ontario HST Rebate for new homes is a Canadian Revenue Agency program that applies to anyone in the province of Ontario who purchases a new home, townhome or condo from a builder. It also applies to anyone who hires a builder to construct a new home. When purchasing a new house or condo to live in as a primary residence, or for select immediate family members to reside in, the Ontario HST rebate is usually assigned to the builder upon closing. As a result, the HST rebate amount is commonly not included in the purchase price while the portion this is not rebatable – the remainder of HST that makes up the full 13% - is included in the purchase agreement. This practice has become the norm for drafting builder purchase agreements and in so, builders’ agreements routinely assume that purchaser will be living in the new construction house or condo. If you will be using the property as your primary residence (for a significant amoutn of time after closing), there is no need to worry about the rebate nor to worry about any HST due on closing. It’s essentially a wash – net zero cost – as the builder will pay it on behalf of the purchaser on final closing and the rebate will be assigned to the builder when it comes time for them to claim the rebate back from CRA.  In this case, the purchaser will see the credit for the HST Rebate amount listed right on the Final Statement of Adjustments.  In effect, the purchaser pays no additional amount abovve and beyond the sticker price of the new construction home (not including additional closing costs, of course), when it will be used as a primary residence.
What if you are not using the new construction house, townhome or condo as a primary residence?
Luckily, there is a program to recover the HST an investor pays on closing called the New Residential Rental Rebate Program in Ontario. If you plan to not live in your investment property, you must obtain a 1-year lease agreement with a tenant in order to apply to get your HST rebate back. Investors are eligible with a 1-year lease and can file to get their money back after final closing of the property. Note that this CRA program creates an additional financial burden on anyone buying new construction for investment purposes, as the investor will need to come up with the additional $16,000 – $29,000 in HST on the closing date along with other standard closing costs.  Note that is the new construction real estate is not being used for long-term rental with a 1 year lease nor is being used as a prmary residence, there is no mechanism for which to reclaim the portion of HST paid on final closing.  This becomes an issue for those who use the property as a vacation or weekend home, or for another function like office space or short-term rental.
HST Relief was co-founded by condo investors and a mortgage broker who have identified the burden of purchasing in the new construction market. HST Relief: Rebates & Loans offers services to assist buyers with their real estate investments pre and post-closing. If you do not have the HST amount available in cash for closing, we will lend you the HST amount needed to close your property. In addition, we file for HST rebates with CRA to our clients’ money back! Call us for a free consultation on your own particular HST scenario, as it applies to you, or to inquire about our loan and HST rebate filing services. Note that we also specialize in HST rebates for those who have substantially renovated their primary residence. For more online reading, check out our clients’ FAQs with our team’s detailed answers posted here.

Closed Sixty Colbourne Street condo with the help of HST rebate experts!

Big thank you to these guys who have helped me close my condo in the heart of the St. Lawrence market area in Toronto.  Thanks to them, I am renting my place with my HST rebate in hand and running with my awesome investment.  Really happy for their insight and I would have gotten myself in trouble with CRA if I hadn't spoken to them first.  I'll be sending my preconstruction clients your way! 

First Canadian Place • 100 King Street West • Suite 5700 • Toronto, ON • M5X 1C7

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