BUYING PROPERTY IN CANADA BY NON-RESIDENTS & EXPATS
Canadian real estate is a lucrative investment market. While markets like Toronto and Vancouver have been thriving and far exceeding housing prices in other areas of the country, from a global perspective these two cities are still more affordable than cities like New York or London. Recognizing the value in our real estate market, we’ve had some Canadian non-residents interested in investing in Canadian real estate while abroad. To help those of you in this category, here’s what you need to know about buying property in Canada by non-residents and buying property in Canada as an expat.
DO CANADIANS LIVING ABROAD HAVE TO PAY THE FOREIGN BUYERS TAX?
The biggest concern for buying property in Canada by non-residents is whether they will have to pay the Non-Resident Speculation Tax (NRST) or Foreign Buyers Tax.
Who is deemed a non-resident varies depending on if you ask the bank or the government. To a Canadian bank, an expat or any Canadian citizen living abroad for more than half of the year (or 183 days) is considered a non-resident and the same financing rules apply to them as they would a foreigner buying property in Canada.
To the government, however, you are not considered a non-resident for tax purposes and so as a Canadian citizen, even non-resident, you are 100% exempt from the Foreign Buyers Tax.
Currently, the Foreign Buyers Tax is only applicable to those foreign buyers who are buying in Ontario (specifically the Golden Horseshoe Area) and in British Colombia. In Ontario the Foreign Buyers Tax is 15% of the home’s purchase price and in B.C. it is now 20%.
GETTING A NON-RESIDENT MORTGAGE IN CANADA
When investing in real estate you need a minimum 20% down payment. As we mentioned above, however, when you’re getting a non-resident mortgage in Canada a Canadian bank will see you as a non-resident foreign buyer and require you to put down at least 35% in order to obtain a mortgage with them.
Keep in mind, as a non-resident investing in Canadian real estate while abroad, avoiding a mandatory 35% down payment means you may want to look beyond the big five banks to secure a mortgage.
Can you get a non-resident mortgage in Canada without needing 35% down? The answer is yes, but you will likely need to turn to private mortgage lenders or trust companies. This is where finding the right mortgage broker, one who has experience arranging non-resident mortgages on behalf of expacts buying property in Canada, is key.
INVESTING IN CANADIAN REAL ESTATE WHILE ABROAD: HAVE YOUR DOWN PAYMENT READY
It’s important to note, that regardless of who you obtain your non-resident mortgage from, you should ensure that you have your down payment funds in a Canadian bank account for at least 30 days ahead of finalizing your mortgage. Non-bank lenders may be more lenient on this, so it’s always good to clarify ahead of time.
CLOSING COSTS WHEN BUYING PROPERTY IN CANADA
When investing in a resale property, you only have two closing costs to account for: Land Transfer Tax (LTT) and legal expenses.
When it comes to investing in pre-construction you have a few extra closing expenses to account for beyond the LTT and legal fees, but they aren’t due until the building registers with the city in three to four years.
Pre-construction closing costs include Development Charges and miscellaneous fees that are specific to newly built properties. You will also need to pay HST at closing to a maximum of $24,000 but may be eligible for a full HST rebate provided you have a one year lease in place. Ensure you discuss your eligibility for this HST rebate with your real estate lawyer as a Canadian living abroad.
If you’re in the market to invest in Canadian real estate while living abroad, the next time you’re in Canada, put aside some time to meet with a few people to help arrange everything accordingly. The team you’ll need include:
• a mortgage broker who specializes in arranging Canada non-resident mortgage
• a real estate lawyer to help ensure all of your non-resident tax questions are answered
• top real estate agent who has a network of professionals to offer you and expertise in investing in Canadian real estate.