BASSETT & COMPANY 

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The Smith's are paying $160,000.00 for their new home. They will pay GST on the home because it is brand new, but because they will occupy the home as their principal residence, they will be eligible for the GST rebate of 36% of the gross GST payable.

They paid their realtor a deposit of $5,000.00 when their offer to purchase was accepted. John has owned a home before, but Ellen has never owned a home and is eligible for the First Time Home Buyers exemption. They will pay Property Transfer Tax on John's half of the transaction in the amount of $800.00. Ellen's half will be exempt.

They have arranged for a Mortgage Loan from their bank in the amount of $153,550.00 which, after deduction of the CMHC fees, application fees and an interest adjustment, will net them approximately $147,169.44 toward their purchase price. Their realtor and lawyer had prepared them for the closing costs, which include the balance of the Purchase Price, Legal Fees, Adjustments of Property Taxes, Water, Sewer, Strata Fees, and any other applicable adjustments that may be applicable.

The Property Taxes in B.C. are assessed for the Calendar Year, (January to December) but are paid in mid year, in the month of June (deadline for payment without late penalties July 2). The Vendors have lived in the property from January 1st of this year to the Possession Date are therefore responsible for the first 92 days of the year. The Purchaser will actually receive the tax notice in June of this year and will have to pay the full amount of the year's taxes. Therefore, the Vendor allows the Purchaser a credit of 92/365 X $1,840.00 or $463.78 on the statement of Adjustments, which reduces the balance due at closing, and the Purchasers will take that amount and add their own share to it to pay the whole bill in June.

The Mortgage

The Mortgage shows a face value of $153,500.00 with interest at the rate of 6.5% calculated half yearly from the 1st day of May 2001. Payments will be made on the 1st day of each month commencing with the 1st day of June 2001. The amount of the periodic payment will be $950.71 which include Principal and Interest only. If any contribution is to be made for property taxes, it will be in addition to this amount. (The Interest Declaration clause does not apply because our borrowers have already been quoted a Semi Annual rate. If the rate had been show as "monthly" then we would have to show the nominal semi annual equivalent of that rate.) The last payment and balance due date are the same, with the mortgage coming up for renewal on the 1st day of May 2002. On a residential mortgage, there is usually no assignment of rents requested, and the payments are almost always made to the lender by way of a pre authorized chequeing plan.

On the second page of the mortgage you will see a number of boxes and short statements. Because our mortgage forms can cover many different types of mortgages, we first have to check off that this mortgage does not intend to provide a floating charge on land (eg. a Debenture type security) and second, that it does not secure a current or running account (eg. a revolving loan). Thirdly, we check off that his property is freehold land (as opposed to leasehold) and that fourthly, that we are agreeing to Standard Mortgage Terms # MT9000183.

To explain Standard Mortgage Terms a little further, we used to have mortgages in BC that had page after page of fine print, with only the first and second and last pages being any different from one mortgage to another. At the Land Title Office, they were obliged to microfilm every page of every document filed, resulting in a great deal of seemingly wasted microfilm. In 1990, with the new Land Title Act, they decided to take all of the standard terms, the one that rarely change, out of the mortgage form itself, and place them in a reference document called "Standard Mortgage Terms" that can be filed once, and then referred to by number. Banks and lenders can customize these terms as they please and file more than one if they wish to do so. Consequently, we now have a very simple two page mortgage, which makes reference to the registration number of the specific lender's Standard Mortgage Terms, and by law, when you sign the mortgage, you automatically agree to the terms set out in the Standard Mortgage Terms referred to therein, EXCEPT as those terms may be modified by Paragraph 10. Paragraph 10 lists any changes to the Standard Mortgage Terms. If the changes are too lengthy to fit in the space provided, then we fill in SEE SCHEDULE and set out the changes on an additional page. Prior permitted encumbrances means those charges which the lender will permit to be registered in priority toi its mortgage, and generaly include non financial charges, but in the case of a second mortgage loan, the First Mortgage would be shown here as a permitted prior encumbrance.

The Property Transfer Tax Return

The Property Transfer Tax Return shows who the purchasers are, who they bought from, the property they purchased and the calculation of the tax payable. In our case, John pays $800.00 tax on his share of the transaction and Ellen claims the exemption. Because of the exemption claim, she must provide some additional information regarding her prior residences, social insurance number, date of birth. etc.

The Vendor's Statement of Adjustments

We have also prepared a Vendor's Statement of Adjustments for Mr. & Mrs. Seller. They will review this document with their lawyer. The statement shows the Sale Price and the GST payable if any. In this case, Mr. & Mrs. Seller are the builders and have sold a brand new home to Mr. & Mrs. Smith. The GST, less the Home Owner Rebate is payable along with the purchase price at closing. The realty Commissions are paid to the two different realtors, the Selling Realtor and the Listing Realtor. Usually, the same adjustments will be shown on the Vendors Statement as were on the Purchaser's Statement. At the bottom, is the amount that will be forwarded to the Vendor's solicitor at closing, on undertakings to pay out all mortgages and other charges and provide clear title to our Purchasers.

We hope that this short review of the procedures necessary to complete your first transaction will be of assistance to you. If you have any questions or concerns, please feel free to contact us at any time. At Bassett & Company, we are ready, willing and able to guide you through the little twists and turns on the road to your new home.