Real Estate

HST New Housing Rebate in Ontario - Taxes due on closing or included in mortgage?

  • Last Updated:
  • May 6th, 2020 11:14 pm
[OP]
Newbie
Aug 27, 2014
4 posts
Mississauga, ON

HST New Housing Rebate in Ontario - Taxes due on closing or included in mortgage?

I'm looking into purchasing a new home (it's already built but I would be buying direct from builder). It will be my primary residence. Listing price is $439,900, and the builder has confirmed that price is inclusive of tax and the applicable new home HST rebate of $24,000. What I'm trying to figure out is whether I will actually have taxes due in cash on closing or whether the remaining tax amount (the HST charged less the rebate) will be included in my mortgage.

I understand from this thread that the calculation goes like this (assuming this is correct):

A - ($439,900 + $24,000) / 1.13 = $410,530.97 (real purchase price)

B- HST Housing rebate = ($24,000) max. You get this and the SOA shows this as a credit. In turn, you assign this credit over to builder so they can claim for you.

C - HST taxes = $410,530.97 *.13 = $53,369.03

A - B + C = $439,900 selling price

From that calculation, I understand that the total HST is $53,369.03, and then the $24,000 rebate is assigned to the builder. But the remaining difference in tax ($53,369.03 - $24,000 = $29,369.03) - how does that get paid for? Is that included in my mortgage principal because the builder has "inflated" the price to cover taxes? Or am I responsible for covering that $29,369.03 in cash at closing?

Trying to figure out how this works before I get too far down the road, just to find out we can't afford it.
16 replies
Deal Addict
Jan 15, 2017
3437 posts
2782 upvotes
You pay $439,900 which includes the $29,369.03 that you mentioned above. On closing, you will be responsible for paying the $439,900 final balance which many people pay with a combination of a down payment and a mortgage.
[OP]
Newbie
Aug 27, 2014
4 posts
Mississauga, ON
Of course, we're prepared for a 10% down payment. I just wanted confirmation that we wouldn't need to come up with an additional $29K in cash, if it couldn't be included in the mortgage.
Sr. Member
Feb 19, 2019
818 posts
884 upvotes
Stouffville ON
skeet50 wrote: You pay $439,900 which includes the $29,369.03 that you mentioned above. On closing, you will be responsible for paying the $439,900 final balance which many people pay with a combination of a down payment and a mortgage.
Exactly, OP pretty much look at it as the $439,900 is the final price you are paying for the house.
However:
departingvirtute wrote:
Trying to figure out how this works before I get too far down the road, just to find out we can't afford it.
There are many additional costs you need to factor in on top of the purchase price:
Land transfer tax - $5,273 ($1,273 if it qualifies as first time home buyer, and no municipal tax applies).
Development charges – the number will be significant, it differs depending on the builder, project and the unit size, you will need to ensure the charges are capped when signing the contract so there are no surprises. You can expect the charges to be between $5 to 30K.
Other charges the builder will pass on to you will be utility hook ups (varies, expect in the range of couple of thousand), Tarion fees ($1,200), and other admin fees. Tarion is always paid by the buyer, you will have to go through the contract to ensure all fees are capped , and possibly negotiate what will be paid by the buyer and what will be paid by the developer.
Capping the charges is extremely important, if the project is delayed and the city increases the charges by 100% you will be paying the fees at the time of closing and the future closing rate, the fees may be significantly higher than what you are expecting.
The developer may ask to prepay other fees such as property taxes.
Legal fees: $1,500 approx.
departingvirtute wrote: Of course, we're prepared for a 10% down payment. I just wanted confirmation that we wouldn't need to come up with an additional $29K in cash, if it couldn't be included in the mortgage.
With 10% downpayment you will be paying $12,273 CMHC insurance.

10 days cooling off period is only for new condos if you change your mind.
Not sure if you were aware of all these additional costs, be prepared to dish out quite a bit in all the additional costs when buying from the builder, on top of the other costs which apply to all purchases.
Full Time and Full Service Realtor
Deal Addict
Jan 15, 2017
3437 posts
2782 upvotes
departingvirtute wrote: Of course, we're prepared for a 10% down payment. I just wanted confirmation that we wouldn't need to come up with an additional $29K in cash, if it couldn't be included in the mortgage.
No, you won't be expected to come up with an additional $29K in cash for the HST. But, you will have additional closing costs in addition to your down payment. You most likely will have legal fees, disbursements, land transfer, title insurance, Tarion warranty, pre-paid expenses, and PST on the mortgage default insurance. Read your purchase agreement to see if you hav e agreed to any other costs.
Deal Addict
Aug 12, 2004
4446 posts
2096 upvotes
Calgary
departingvirtute wrote: Of course, we're prepared for a 10% down payment. I just wanted confirmation that we wouldn't need to come up with an additional $29K in cash, if it couldn't be included in the mortgage.
Fair warning, be sure to read your paperwork with your builder, do not go based on what people are saying here. When we purchased our condo we thought similar, that the HST rebate was being taken care off. Then we got our closing costs.

The builder did not take responsibility of filling out the HST rebate form or do the paperwork, and TD did the mortgage assuming that the HST rebate was covered by the builder (which it is in most cases). In the end, we were on the hook to pay for 14K of extra closing cost for the GST within 2 weeks that we were not expecting. We did get it back once we submitted the HST rebate form but we had to put it on a credit line and be creative.

Read your paperwork and don't be caught offguard or assume it is covered.
[OP]
Newbie
Aug 27, 2014
4 posts
Mississauga, ON
Firebot wrote: Fair warning, be sure to read your paperwork with your builder, do not go based on what people are saying here. When we purchased our condo we thought similar, that the HST rebate was being taken care off. Then we got our closing costs.
We'll be sure to do that. Did you not have the paperwork reviewed by a lawyer that could advise you of the missing rebate?
Deal Addict
Aug 12, 2004
4446 posts
2096 upvotes
Calgary
departingvirtute wrote: We'll be sure to do that. Did you not have the paperwork reviewed by a lawyer that could advise you of the missing rebate?
That's where the closing cost came in. The lawyer is who advised us we need to cover the tax as neither the builder or TD accounted for it. Don't assume the builder will do the housing rebate paperwork, and don't assume your lender will cover what the builder did not on their mortgage.

To close we needed the closing cost + sales tax and had 2 weeks to come up with the additional funds.
Banned
Jun 4, 2018
90 posts
45 upvotes
Toronto
Applying for the HST refund is a pain in the neck. I found a great lawyer who specializes in doing it....only charged me $400 and I ended up getting $24,000 back!
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Newbie
Dec 2, 2012
10 posts
1 upvote
VictorS858055 wrote: Applying for the HST refund is a pain in the neck. I found a great lawyer who specializes in doing it....only charged me $400 and I ended up getting $24,000 back!
Do you mind sharing your lawyer's name?
Deal Addict
User avatar
Aug 3, 2005
1318 posts
146 upvotes
Markham
I would like this name too. I'm just in the process of taking occupancy of my Condo now and realized the builder has a Authorization to Lease agreement in the Purchase contract that i have signed. I don't recall requesting this option from the builder because I planned to always move in. I hope i can still get the HST refund back after closing and i have the deed to the property.
Sr. Member
Dec 28, 2010
622 posts
243 upvotes
Toronto
blackhawks191 wrote: Do you mind sharing your lawyer's name?
It's not that hard and a for a new build, if you are closing with proper adjustments calculation , you don't need a separate lawyer.
There are simple forms and CRA is pretty good at refunding it with interest.
Newbie
Apr 28, 2019
49 posts
48 upvotes
If u don’t mind... where did u find house for that price?

We are trying to figure out what we can afford where

Thanks

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