The rules around foreigners buying real estate in Canada aren’t actually related to citizenship – even citizens of Canada who don’t reside here for more than half the year are considered non-residents (and thus subject to all the same rules).
Canada welcomes home buyers from all countries, and there are no restrictions on the amount or kind of real estate you can buy.
Important! As of April 21, 2017, any individual who is not a Canadian citizen or permanent resident of Canada (including corporations and trusts) is subject to a Non-Resident Speculation Tax of 15% of the purchase price (paid at closing) for properties purchased in Toronto, Brant, Dufferin, Durham, Haldimand, Halton, Hamilton, Kawartha Lakes, Niagara, Northumberland, Peel, Peterborough, Simcoe, Toronto, Waterloo, Wellington and York. You can read the details of the Non-Resident Speculation Tax here.
Please Note: Owning a property in Canada does not give you any immigration privileges and if you want to live here, you’ll still need to qualify under Canada’s Immigration Laws.
Things to keep in Mind with regards to Your Real Estate Investment/Buying
While Canadian lenders do finance the home purchases of non-residents, they usually require significantly larger down payments. Most of our non-resident clients are required to have a 35% cash downpayment. Lenders will require you to verify your income and credit worthiness and prove that you can pay the mortgage. Also, mortgage interest rates may be higher than what Canadian residents would pay though , they are still very attractive rates.
How do You qualify for a mortgage as a non-resident?
To qualify for a mortgage for a property in Canada, non-residents will generally require:
- A 35% downpayment (not from gifted funds)
- A reference letter from their bank
- An employment letter verifying income in Canadian or US dollars
- Three months bank statements
- Canadian credit check
What kind of interest rate will You get on a mortgage as a non-resident?
Non-residents are eligible for the same interest rates as Canadians, provided they meet the mortgage eligibility criteria. If you live in a country that does not have a tax treaty with Canada, you will only be eligible for a fixed-rate interest rate.
If you don’t meet the eligibility requirements, you may still be able to get financing from other lenders who charge higher interest rates.
Will Canadian banks consider rental income as part of Your income?
Most lenders will only consider rental income from Canadian properties, and thus rental income from properties outside of Canada will not be considered part of your income to qualify for a Canadian mortgage.
How long does the down payment have to be in a Canadian bank?
Normally, most Canadian banks will require your down payment to be in a Canadian bank for 30 days before the closing of the purchase. Most banks will want to be able to trace the source of your down payment going back 90 days.
Do You need to come to Canada to buy a property?
You can buy a property from anywhere in the Canada but note that you will be required to come to Canada to open a bank account and you will l need a Canadian bank account if you are getting a Canadian mortgage. To take ownership of the property ,you can do that with a notary public in the country you are in and your Canadian lawyer can take you through exactly what is required.
Where can You find a lawyer who can help You with the purchase as a non-resident?
I do work with some excellent lawyers who are familiar with the intricacies of working with non-residents and I will be happy to recommend them.
As with any investment, it’s important to contact your accountant to understand fully how the purchase or sale of a property in Canada will affect you from a tax perspective. The following is meant to be a guideline only:
Non-Canadian citizens and non-permanent residents of Canada buying a property in the Toronto region must pay a 15% tax on closing. Click here to read more about the Non-Resident Speculation Tax.
When buying a property in Toronto, foreign buyers pay the same land transfer taxes as Canadian residents. First time home buyers who plan to use the purchase as their primary residence may be eligible for land transfer tax rebates.
There are also tax implications for non-residents when selling a property. There are forms, processes and penalties for not complying with Canada Revenue Agency (CRA)’s rules. Full details of the tax implications for non-residents selling property can be found on the CRA website though you should contact your accountant to understand the tax implications of selling a property in Toronto as a non-resident.
Here are the costs you need to be prepared to pay when buying a property in Canada.
- Deposit (usually 5% of the purchase price in Toronto, paid within 24 hours of your offer being accepted)
- Property Appraisal ($400- $500, often paid by the lender)
- Home Inspection ($400-$600, paid to the home inspection company at the time of the inspection)
- Balance of the Purchase Price – the purchase price less your initial deposit. Usually, the bulk will come from your lender and become your mortgage.
- Legal Fees – amount varies depending on purchase price and lawyer (approximately $1,800 for a $500,000 purchase)
- Title Insurance – sometimes included in your legal fees ($250-$400)
- Mortgage Broker Commission – if applicable, usually paid by the lender
- Property Survey – if required ($1,000-$2,000)
- Non-Resident Speculation Tax – 15% of the purchase price
- Ontario Land Transfer Tax – varies depending on purchase price
- Toronto Land Transfer Tax (varies depending on purchase price
- Property Tax Adjustment – reimbursement to Seller of property taxes they paid beyond the closing date
- HST – generally only applicable on new construction condos and houses
- Tarion Warranty Fees – warranty on new construction condos and houses only, not resale,
- Provincial Sales Tax – only applicable on chattels purchased from vendor (amount varies)
- Adjustments for Utilities/Condo Fees/etc. – reimbursement to Seller for prepaid utilities, etc.
It’s sometimes difficult (and more expensive) for non-residents to obtain insurance for an investment property. Given that proof of home insurance is required to obtain a mortgage, this is an important factor to consider. If you’re looking to buy a Toronto investment property, make sure to get insurance quotes and information before making an offer.
I am currently working with a few builders on their Pre-Construction Sales, and if You would be interested, I would like to share the details of the same.
Please feel free to reach out to me via this email, or on my direct line at 416 543 4198