What to know about buying a home in Canada as an American
With the Canadian dollar at a low, many Americans are interested in buying property north of the border. A few years ago when the loonie was stronger than the U.S. dollar, Canadians were snatching up rental properties and vacation homes in popular destinations such as Florida, Arizona, and South Carolina. Today, the international real estate market tells a very different story.
Americans are crossing the border to buy property because the strong U.S. dollar gives them buying power and a price advantage after the conversion. However, coming to Canada and buying property isn’t as easy as showing a passport and flashing a bag of cash. The homebuyer process for foreigners in Canada is slightly more complicated.
Here’s what Americans need to know about buying a home in Canada:
Having a home here doesn’t make you Canadian
Canada is a very welcoming country. If Americans want to purchase property in Canada we’re happy to have them. However, if they’re doing it as an immigration tactic it won’t work. There are no restrictions on the number of properties that foreigners can own in Canada, but it doesn’t give them any immigration privileges. Americans who own property in Canada are treated like any other visitor when crossing the border.
Canadian banks require larger down payments
In some circumstances, Canadian banks finance the purchase of property in Canada for foreigners, just as they sometimes finance the purchase of overseas property for Canadians. However, there are stricter buying guidelines and a more demanding approval process.
Canadian banks require larger down payments for non-residents. As Canadians, we can get away with as little as 5% for a down payment. Non-residents, on the other hand, usually need at least 35% in cash savings for the purchase of a property in Canada.
Banks also require proof of income and a credit check before approving an American for a mortgage – even with the larger down payment. An American buying a home in Canada can also expect to pay a higher interest rate from in exchange for the added risk of lending to non-residents.
Don’t forget about home insurance
Whether you plan to buy property in Canada for your family to use a vacation home or rent it out as an investment property, you need to buy homeowner’s insurance. This is especially important since you won’t be living in the property all year – if at all – so you want to make sure the structure and contents are always protected.
You owe the Canadian tax man
Taxes: whether you live in the U.S. or in Canada you have to pay them. If you plan to buy, rent, or sell property in Canada, foreigners need to notify the Canada Revenue Agency because taxes are due. For more information on how Americans should treat their Canadian property when it comes to tax time use this guide from the Canada Revenue Agency. It’s also a good idea to consult with a professional, such as an accountant, before making an offer to purchase – just to be sure buying a home in Canada is in your best financial interest.