Why HST Applies to New Builds
HST applies to the sale of newly constructed or substantially renovated homes in Ontario, since builders are essentially selling a new product rather than an existing asset. Resale homes are exempt from HST because the tax was already applied when the home was originally built.
How the New Housing Rebate Works
The federal and provincial governments offer a rebate on a portion of the HST paid, which reduces the effective tax burden for buyers who intend to use the home as their primary residence. Many builders factor this rebate directly into the advertised purchase price, assuming the buyer qualifies and assigns the rebate to the builder.
- Applies mainly to primary residences
- Often built into advertised pricing
- Rules differ for rental properties
Rules for Investment Properties
If you are buying a new build as a rental property rather than to live in, different rebate rules apply, generally under the New Residential Rental Property Rebate. You typically pay the rebate amount upfront and then apply for reimbursement, and you must meet specific rental term requirements to qualify.
How This Affects Your Mortgage Budget
If HST is not properly accounted for in your budget, especially on rental purchases, you could face a larger closing cost than expected. Confirm with your lawyer and accountant exactly how HST and any rebate will be handled on your specific purchase agreement well before your closing date.
Common Mistakes Buyers Make
Some buyers assume the rebate is automatic without checking their specific eligibility, particularly investors who plan to rent the unit. Others fail to budget for a temporary HST outlay if the rebate has to be claimed after closing rather than credited upfront. Review your agreement of purchase and sale carefully to understand which scenario applies to you.
Frequently asked questions
- Do I have to pay HST on a resale home?
- No, resale homes are generally exempt from HST since the tax applies specifically to newly built or substantially renovated properties.
- Can I still get the rebate if I rent out my new condo?
- Yes, but under different rules than owner occupiers, typically requiring you to pay the HST upfront and then apply for a rental property rebate afterward.
- Is the rebate always included in the builder's advertised price?
- Often yes for owner occupied purchases, but always confirm this directly in your purchase agreement rather than assuming, since terms vary between builders.