Scott Peckford

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The HST has been looming large in the minds of prospective homebuyers. A recent IPSOS Reid survey indicated 40% of BC Home Buyers believe the HST will impact their home buying plans. The question is, how big of an impact will it have?

The jury is still out on exactly how the HST will affect the overall housing market. However under the current proposal a homebuyer purchasing a used or resale home will see only a marginal increase in their actual costs.

According to Tony Spagunolo, “The average buyer purchasing a used home will see an increase of maybe $100 if the HST is implemented in the current form.” Spagunolo owns, The Spagunolo Group of Real Estate Law firms, and specializes in Real Estate conveyance.

When you break down the numbers it becomes apparent Tony is right.

Buyers only pay GST on new real estate. Therefore a resale property should not be subject to HST. Legal fees already include GST and PST therefore will have no change.

The only additional cost will be on home appraisals and inspections. Home appraisers and inspectors currently only charge GST.

In the Okangan an appraisal can cost about $300 while an inspection is around $175. The total GST on both is currently $23.75. Once the new rules take effect July 1st, 2010 the total tax will increase to $57.00 which is an increase of only $33.25, which is not enough to

Who will the HST hurt the most?

Sellers will actually pay quite a bit more HST than buyers. Sellers pay Real Estate commissions which are subject to GST. Considering the average $400,000 sale generates a commission of around $16,000 the HST will add an additional $1120 in tax. Not a small sum, but probably not enough to prevent a sale either.

Perhaps the single group most likely to feel the pinch from the HST are homebuilders. In particular builders who have a building completing after July 1/2010 will be the most impacted. There is a transitional tax planned for these buyers, but rest assured the builders, or more likely buyers are going to absorb some of the new tax.

It seems the provincial government is convinced more tax is the cure for what ails us. Whether this is the case still remains to be seen. At least homebuyers purchasing resale real estate can breathe a collective sigh of relief since the increased cost of the HST will be less than a less than a pizza and a six pack of beer.

A lot of personal finance gurus claim the road to wealth does not pass a Starbucks drive thru. I wholeheartedly disagree. Trying to get rich by cutting a $5 latte from your spending is like trying to dig a basement with a shovel. It can work, but it is painfully slow.

Instead a faster, less painful way is to focus on the bigger ticket items. Negotiate like crazy on major purchases like cars, homes and appliances. It is much easier to save hundreds or even thousands of dollars by tackling the larger purchases.

A smart way to ensure your large purchases do not take a bite out of your budget is to build and maintain an excellent credit rating.

Unless you plan to pay cash for everything you will need to borrow money at some point. A high credit score will ensure your big ticket items cost you as little as possible.

Don’t get me wrong. Skipping the Latte’ can save you money, but the difference between a 650+ credit score and a 540 credit score is substantial. In fact, it can be as much as $64,000 over 25 years. That adds up to over 12,000 lattes! (see chart)

How good of a credit score do you need?

A credit score of 700 or higher should ensure you qualify for the cheapest money for credit cards, loans and mortgages.

How do you find out your personal credit score?

It is possible to get a free copy of your credit report from Canada’s two largest Credit Reporting Agencies, Equifax and Transunion. You will have to search the website to find the number to call. Alternately, you can purchase your report online and have instant access.

Avoid websites offering “free” credit reports. Many of these sites offer a free credit report under the assumption you sign up for a monthly subscription service. It is possible to cancel the service once you have your free credit report in hand, but make sure you know what you are signing up for and how to get out.

The credit score has quietly become the standard test of your financial intelligence. Long gone are the days of acquiring a loan based solely on reputation or your past history with your bank. It is important to not only understand how credit works, but how to improve and maintain your score.

In an upcoming series I will examine the all important Credit Score how it works and give you tips on how to negotiate everything from mortgages, to mini-vans.

Next week: The A, B, C’s of Credit

For more insights on mortgages and money visit http://www.scottpeckford.com

If you are considering buying a home don’t forget about the importance of location. A busy street is likely to be less desirable and less marketable if you ever need, or want to sell. This video highlights one of the dangers of living on a busy street.

The most stressful mistake first time buyers make is not getting ‘properly’ pre-approved. This is probably one of the simplest problems to solve, but you do need to understand how this works.

This video will answer the following

* What is the difference between a pre-approval and a rate hold?
* The number oneway to tell if your banker or broker is experienced or not?
* How you will know if you have a ‘proper’ pre-approval?

To take the pre-approval quiz go to Smart First Time Buyer.ca