Premier Dalton McGuinty's plan to harmonize sales taxes threatens 21,200 construction jobs and will cost buyers of new homes at least $800 million, a housing industry analysis warns.

The melding of the 8 per cent provincial sales tax with the 5 per cent GST on July 1, 2010, will be especially onerous to buyers in Greater Toronto due to higher house prices, says the report commissioned by the Building Industry and Land Development Association (BILD).

GTA purchasers will pay $575 million of the $800 million, wrote Altus Group's Frank Clayton, who prepared the 28-page report, the first detailed examination of the new tax's impact since it was announced in the March 26 budget.

Prior to the budget, BILD had estimated it could cost Ontario homebuyers $2. 4 billion if the taxes were harmonized. That was before Finance Minister Dwight Duncan disclosed that residences costing less than $400,000 would effectively be exempt from the HST and there would be partial rebates for homes less than $500,000.

But new houses that cost more than $500,000 would be subject to the harmonized tax.

"The impacts will disproportionately hit new housing in the Greater Toronto Area because of its higher price level and middle-income households," wrote Clayton, whose study will be released today.

"New homes over $400,000 are not exclusively owned by the very wealthy," he noted, adding "a significant number of (such) households are classified as 'middle class.'"

About one third - 36 per cent - of all new homes sold in the GTA cost more than $400,000 and even a 10 per cent to 15 per cent reduction in demand due to the new tax would mean 7,400 to 11,100 fewer units being built.

That translates into 14,100 to 21,200 jobs in construction and related industries and $720 million to $1.1 billion in lost wages.

Interim Progressive Conservative leader Bob Runciman has tabled a motion urging McGuinty "to acknowledge that, due to the current economic downturn, this is the wrong time to move forward with his ill-advised plan to yet again increase taxes on all people of this province."

In addition to housing, the blended 13 per cent tax will boost the price of hundreds of items, such as gasoline, heating fuel, fast food, newspapers, magazines, taxi fares and dry cleaning, among other things, that are now only subject to 5 per cent GST.

Even though Liberal MPPs and cabinet ministers privately share Runciman's concern about the change, the premier insists it is full-steam ahead with the reform. "We need to do this to strengthen our economy," he told reporters.

The harmonized tax will hasten people's decisions to buy homes, said David Poon, a real estate agent with Cathedraltown, a housing development in Markham. "There's still a lot of time but I'm already seeing prospective buyers scrambling to find homes," he said yesterday.

"A lot of people want to beat the deadline. It's not making (buyers) happy. If my house costs about $500,000, I'll have to pay another $40,000 after July 1," said Poon. who called the harmonization nonsense.

There are many different reasons to renovate a home: to save energy (and save on utility bills), to make room for a growing family, to improve safety or increase the resale value of your home, or simply to bring a fresh new look to your home. There are also a number of different ways to finance your renovation. Read on to obtain information for a number of financing options, along with practical advice to consider before starting your renovation project.

Before You Begin

Whether you intend to finance your renovation yourself or borrow money, you should talk to a financial advisor and to your lender before you make firm plans. They can help you understand your options, and advise you on how much you can borrow and even pre-approve you for a loan. This information will help you plan realistically.

Explore Your Options

Your own resources: For smaller renovation projects, you may consider self-funding material costs, especially if you plan to do the work yourself.

Credit card: Likewise, you can use your credit card to pay for materials for smaller renovations. But be careful not to carry the balance for too long; credit card interest rates can exceed 18%.

Personal loan: With a personal loan, you pay regular payments of principal and interest for a set period, typically one to five years. You also have the option of a fixed or variable interest rate for the term of the loan. The interest rate on a personal loan is typically less than that of a credit card. Unlike a line of credit, once you pay off your loan you will have to reapply to borrow any new funds needed.

Personal line of credit: This is another popular choice for financing renovations. It is ideal for ongoing or long-term renovations since it lets you access your funds at any time and provides a monthly statement to help track expenses. A line of credit offers lower interest rates than credit cards, and charges interest only on funds used each month. And, as you pay off your balance, you can access remaining funds, up to the line of credit’s limit, without reapplying.

Secured lines of credit and home equity loans: These options offer all the advantages of regular lines of credit or loans, but are secured by your home’s equity. They can be very economical, since they offer preferred interest rates, however initial set-up costs including legal and appraisal fees usually apply. Lines of credit and home equity loans are usually limited to 80% of your home’s value. With CMHC insured financing, lenders may offer borrowers who qualify the option of making interest-only payments for the first five or 10 years.

Mortgage refinancing: When funding major renovations, refinancing your mortgage lets you spread repayment over a long period at mortgage interest rates, which are usually much lower than credit card or personal loan rates. This type of financing can allow you to borrow up to 80% of your home’s appraised value (less any outstanding mortgage balance). Initial set-up costs including legal and appraisal fees may apply. If you need to tap into more of the equity in your home, loans of up to 95% of your home’s value can also be provided when insured by CMHC Mortgage Loan Insurance.

Financing improvements upon-purchase: If you’re planning major improvements for a home you’re about to purchase, it may be advantageous to finance the renovations at the time of purchase by adding their estimated costs to your mortgage. CMHC Mortgage Loan Insurance can help you obtain financing for both the purchase of your home and the renovations — up to 95% of the value after renovations — as little as 5% down payment.

Other Considerations and Options

Planning for the Unforeseen

It’s a good idea to set aside a percentage of your renovation funds to cover items not included in your renovation contract, for things you discover you’d like to add once work is under way, like extra or upgraded features, furniture, appliances and window coverings or for contingency. A separate fund lets you make decisions easily, without having to renegotiate your financial arrangements or reapply for new funds.

Grants and Rebates for Energy-Saving Renovations

Across Canada, renovation grants and rebates are available from the federal and provincial governments and local utilities, especially for energy-saving renovations. If you qualify, they may help pay for some of your project’s costs.

Canada’s Economic Action Plan Offers Home Renovation Tax Credit

Renovating can be a great way to add value to your home. It can make your house a more comfortable environment for you and your family, and even reduce your energy bills. And now, with the introduction of the new Home Renovation Tax Credit (HRTC), this might be the best time to begin the renovations you’ve been planning.

As part of Canada’s Economic Action Plan, the Home Renovation Tax Credit will provide a one-year, temporary 15% income tax credit on eligible home renovation expenditures for work performed, or goods acquired after January 27, 2009 and before February 1, 2010. The credit may be claimed on eligible expenses exceeding $1,000, but no more than $10,000, for a total credit of up to $1,350.

Eligible renovation expenditures include: renovating your kitchen, bathroom or basement; installing new carpet or hardwood floors; building an addition, deck, fence or retaining wall; installing a new furnace, central air conditioner or water heater; painting the interior or exterior of your house; resurfacing a driveway and laying new sod.

Renovations which are not eligible for the credit include: purchase of furniture, appliances and tools, carpet cleaning, and maintenance contracts.

To obtain more information on the Home Renovation Tax Credit, call 1-800-O-Canada or visit the Canada Revenue Agency Web site.