Can the PTT be financed? | www.rebgv.org

If you’ve found a home you plan to buy, your REALTOR® will go over closing costs, including the Property Transfer Tax (PTT).

The PTT is a provincial tax of 1% on the first $200,000 and 2% on the remainder of your home price. For example, the PTT on a $600,000 home is $10,000.

When you register your property title you must pay the PTT, unless you qualify for the First Time Home Buyers’ Exemption.

Financing the PTT

A buyer with a conventional mortgage (more than 20% down payment) may be able to take the PTT out of their equity. If you have less than a 20% down payment you will likely be unable to do this due to lender requirements.

The PTT is a closing cost and closing costs can’t be financed as part of a mortgage. Mortgage insurance providers such as CMHC stipulate that applicants must be able to cover closing costs.

Lenders, however, look at each situation on a case-by-case basis. If a buyer has good credit and the ability to pay monthly costs, a lender may provide a line of credit or a loan to finance the PTT.

Government legislation/policy

Provincial government: the provincial government sets the tax amount and collects it. There is no legislation or policy prohibiting financing the PTT.

Federal government: the Bank Act, section 418(1) governs the loan-to-value ratio for mortgage insurance. It requires borrowers with a high-ratio mortgage (80% or more of the property value) to buy insurance against default from an insurer such as CMHC. It doesn’t prohibit financing the PTT.

An example where a buyer financed the PTT

A buyer owned an apartment and sold it to pay tuition to medical school. The buyer has now graduated and is working at a clinic for a salary of $200,000 and has not saved a downpayment. The buyer sees a home for $600,000.

In this case, the borrower has good credit and no debt. The lender may offer this buyer a line of credit or loan for the down payment and for closing costs such as the PTT.