As your family grows, so does your need for more room in your home. For many people, there are basically two choices, either move to a larger property or add an extension to your current property. While both of these can be expensive choices, as of July 1, their costs have increased just that little bit more due to the HST.
For families that are considering a home renovation, HST is applied to all of the materials that are required to carry out the construction. Prior to July 1, building materials were only taxed at the provincial sales tax level, but since then the tax has increased by about 6% for the additional HST. While the costs have increased, home owners can refinance and borrow against the equity in their home. According to the National Post, borrowing for home renovations and improvements is allowed by the Canada Mortgage and Housing Corp. In fact, the proposed improvement costs are incorporated into the current value of the home and then the refinancing is carried out on this new equity value.
What is important to keep in mind is the actual cost of the proposed renovations. Once the materials and fees, as well as taxes, have been taken into consideration, it may be worthwhile, and cheaper, for some families to trade up to a larger property.
In cities such as Toronto where the real estate market has seen a slowing in the last four to six weeks, home owners may in fact spend less to purchase a larger property than renovating the one they currently live in. While HST does affect home purchases that take place after July 1, the actual purchase price of property that is being resold is not taxed. Going forward, any services and commissions that are part of the real estate transaction will be taxed, so keeping these additional costs in mind is important when comparing the costs of moving or adding on. It is also important to note that new home sales will have HST charged against the value of the property.
Costs are just one of many factors to consider when deciding how to house your growing family, and while they may be an important factor, they are not the only one to look at. Each individual should evaluate their own situation carefully before choosing one of these life-altering options.
