Earlier in October of 2016, the Federal Government of Canada announced several changes to mortgage legislation, with the most significant changes affecting first time homebuyers.
Under the new rules, and regardless of the amount of the deposit that a first time home buyer is putting down towards their purchase, all first time homebuyers will be subject to a “stress test” to see if they can qualify and be approved for a mortgage.
The “stress test” is designed to determine whether or not the home buyer could still afford to make their mortgage payments in the event of an increase in mortgage rates or a change in personal finances. It is widely expected that these changes will result in some first time home buyers not being able to qualify for the type or amount of mortgage that they previously would have been offered.
While there have been many news stories, articles and opinions written about these particular changes, a recent legislative amendment made by the Provincial Government of Prince Edward Island has received much less publicity.
However, effective October 1, 2016, the Government of Prince Edward Island has removed the “cap” on the first time homebuyers transfer tax exemption. While there are several exemptions to paying transfer tax, in most cases involving the purchase and sale of real property in the province of Prince Edward Island, purchasers are required to pay a transfer tax to the Government calculated on the greater of one (1%) percent of the purchase price or the assessed value of the property being bought.
Prior to October 1, 2016, and for those who qualified as a first time home buyer, an exemption from having to pay transfer tax could be claimed, so long as the purchase price and the assessed value of the real property being purchased did not exceed $200,000.00. However, as of October 1, 2016, this “cap” of $200,000.00 has been removed, so that anyone who qualifies as a first time home buyer can claim the associated exemption and avoid having to pay the one (1%) percent transfer tax regardless of the purchase price or the assessed value of the property that they are buying.
For a property valued at $300,000.00, this represents a savings of $3,000.00 to the first time home buyer.
If you would like more information on this new legislative exemption, would like to see if you qualify as a first time home buyer, or have any other questions or concerns about buying and selling property in Prince Edward Island, please do not hesitate to contact us at Key Murray Law.
Ryan MacDonald
Partner
ryan.macdonald@keymurraylaw.com
902.368.7825
Legal information appearing in this article and elsewhere on Key Murray Law’s website is intended for informational purposes only and is not intended to substitute for or replace any legal or other professional advice. If you have specific concerns or a situation in which you require legal advice, you should consult directly with one of our lawyers.
