Just because your mortgage term has not expired, doesn’t mean you cannot take advantage of the low interest rates. Let me show you some numbers, which might help you, think about your current mortgage and how I might be able to put more money into your pocket on a monthly basis.

Client ‘X’ current mortgage

Original Balance – $515,250.00

Outstanding Principal (after 1 yr of payments) – $510,500.00

Amortization – 40 yrs

Interest Rate – 5.02%

Term – 5 yrs

Mortgage – fixed

Payment Frequency – semi monthly

Payment – $1235.00 ($2470.00/month)

By switching to a modest 3.85% fixed 5 year rate client ‘X’ is saving $206,874.12 over 35 year amortization (Please note that 40 yr amortization schedules are no longer offered in Canada), $286.00 per month or $3,432.00 per annum or $17,160.00 over 5 years. There are countless things one could do with that money; pay your property taxes, take a vacation, small home renovation, RRSPs, etc… Remember by decrease the amortization period, even slightly, we allow you to put more of your hard earned money towards the principal and less into the bottomless pit of interest.

 If you do consider switching lenders for a better rate and paying out your current mortgage before term maturity, there may be a penalty issued from you current lender and additional closing costs for the new mortgage. It is hard to estimate those numbers as all lenders, appraisals, legal and survey fees are different.

1. The Harmonized Sales Tax (also known as the new BC HST) is 12% tax applicable to most goods and services, including new homes, real estate, and property.

2. The new B.C. HST 12% Tax is the combination of the Federal Goods and Services Tax (5% GST) and the Provincial Sales Tax (7% PST).

3. Implementation of the BC Harmonized Sales Tax will take place on July 1, 2010.

4. The BC HST is NOT a 12% real estate tax, but a provincial harmonized tax on most goods, services and consumer products including new homes.

5. Currently, new BC and Vancouver homes are subject to 5% GST (federal tax) in which first time homebuyers or investors can receive GST rebates. This 5% GST will be replaced with the higher 12% B.C. Harmonized Sales Tax (HST), a 7% difference in taxes on the total purchase price of a new British Columbia home or property.

6. The B.C. HST program will give partial rebates for new BC homes priced up to $400,000. The government will give these homebuyers a partial five per cent BC HST rebate on the provincial tax side which makes any new B.C. home or Vancouver property $400,000 or less no more expensive than it is today.

7. Homebuyers looking to buy new Vancouver property over $400,000 will receive a maximum BC HST rebate of $20,000, but will see the purchase price above that level subject to the extra five per cent tax rate system.

8. The British Columbia Harmonized Sales Tax of 12% HST is also applicable to any costs and fees associated with your property/home purchase including legal/notary fees, commissions and other closing costs.

9. The BC HST transition rules are unclear at this time. It is unknown whether new Vancouver home sales contracts written before July 1, 2010 but completed after the harmonized sales tax HST launch date will be subject to the current 5% GST only or the entire 12% HST new tax.

10. The cost of new home ownership will increase significantly in British Columbia due to the new BC HST tax of 12%. Not only will your new home or real estate cost more up front, but the 12% HST harmonized sales tax is also applicable to such things like strata fees, residential heating fuel, commercial rents, smoke detectors, fire extinguishers, repairs, cable TV, internet, electricity, gas, renovations, painting and other professional services.

Scenarios

Scenario 1: Based on a purchase price of $600,000 for a new BC or Vancouver home, the homebuyer would pay a total of $72,000 in BC HST taxes (12% on $600,000). With the homebuyer HST rebate for purchases above $600,000, the homebuyer would receive the $20,000, thus reducing their purchase cost to $52,000 in taxes for a total of $652,000. Currently, the 5% GST applicable to the same home would cost only $30,000 (a difference of $22,000). *This does not include the HST applicable to closing fees.

Scenario 2: If a BC homebuyer wanted to purchase a new Vancouver home costing $800,000, the total 12% HST hit would be $96,000. The partial HST rebate of $20,000 (maximum allowed) will reduce this to $76,000, making the final purchase price at $876,000 plus property transfer taxes and other closing costs. Before July 1, 2010, a new home would be subject to only 5% GST which is $40,000 on a $800,000 property. With the new BC harmonized sales tax, a BC homebuyer would pay $36,000 more for the same home after implementation of the HST tax. *This also does not include the HST applicable to closing costs.