Toronto old and new

We help a lot of non-residents buy property in Toronto, and there are some questions that come up repeatedly. Below, you’ll find answers to the most frequently asked questions.

RESIDENCY QUESTIONS FOR NON-RESIDENTS

Who can buy real estate in Canada?
Canada welcomes home buyers from all countries, and there are no restrictions on the amount or kind of real estate you can buy. Some banks will restrict the number of properties they will finance to 5 properties per person.

Will buying a property in Canada improve my chances at immigration?
Immigrating to Canada is a complex process and, unfortunately, owning property here is NOT one of the factors taken into consideration. Of course, it won’t hurt your chances and will be considered part of your overall net worth, but simply owning a home in Canada does not affect the selection process. If you’re wondering if you’d be eligible to immigrate to Canada, visit the Government of Canada Citizenship and Immigration website.

I’m a Canadian citizen living in a different country. Would I be considered a non-resident for the purposes of buying real estate if I’m an expat?
Citizens of Canada who don’t reside in Canada for more than half the year are considered non-residents (and thus subject to all the same rules).

I’m a non-resident and want to purchase a property in Canada with a resident. How will that be treated?
If you buy a property with a non-resident, you will be treated by a Canadian bank as a non-resident and thus subject to the same requirements, including a higher downpayment.

FINANCING Q&A FOR NON-RESIDENTS

Can a non-resident get a mortgage to purchase a house in Canada?
Yes! Usually Canadian banks and lenders require non-residents have a minimum 35% down payment (in other words, 35% of the cost of the home paid for in cash, with a maximum of 65% of the home’s value provided as a mortgage). Different banks have different rules of course, and some will be more strict than others.

How do I 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 I 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. [See a list of countries that have in-force tax treaties with Canada]

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 my 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.

What’s a deposit, when do I need it and how do I pay it?
After you’ve made an offer on a property in Canada, you’ll need to provide a deposit – usually around 5% of the purchase price in Toronto – within 24 hours. That deposit is held in trust by the listing brokerage and forms part of the down payment when it comes time to take possession of the property. It’s a good idea to open a Canadian bank account and have the deposit in the bank account when you start the search for a property – when you are ready to pay the deposit, they can either issue a certified cheque for you, or they can arrange to send the deposit funds via wire transfer.

Can you recommend a mortgage broker who is used to helping non-residents buy property in Canada?
We have put together a full team to help our non-resident clients. If you work with the BREL team to buy your home, you’ll have access to mortgage lenders, lawyers, home inspectors and insurance agents who understand the intricacies of non-resident home purchases or investments.

What kinds of closing costs should I expect to pay?
You will pay the same closing costs as Canadian residents – land transfer taxes and legal fees. [See Related: Closing Costs]

Will I qualify for any government programs?
As a non-resident, you will not qualify for the first-time buyer programs or land tax rebates offered by the Canadian government.

I don’t need a mortgage. How do I pay for the property?
You can buy a property without getting a mortgage if you have 100% of the funds in cash. That money would need to be transferred to your lawyer before closing on the property.

HOME BUYING PROCESS QUESTIONS

Do I need to come to Canada to search for a property?
We’ve helped many non-resident Buyers buy property while they were overseas. We use video, live walk-throughs via Skype or Facetime and interactive online tours – it’s  almost as good as seeing the home in person! Many of our non-residents also choose to have a family member of friend living in Canada assist with the home search process. If you are going to need a mortgage, you’ll need to have a Canadian bank account – Canadian banks will require you to come to Canada to open a bank account. Note there are some exceptions to this (for example, we’ve had clients with HSBC accounts able to get a  mortgage without coming to Canada).

I want to buy a house. Can you recommend a home inspector?
When you work with the BREL team, you get access to all our partners – home inspectors, handymen, painters, contractors, plumbers, electricians, etc.

If I buy an investment property, can you find tenants for it and manage it for me?
Our team helps many landlords find tenants for their properties; we even have a property manager on staff. Of course, there are additional costs for these services – but it allows our non-residents to own investment properties here, worry-free.

LEGAL QUESTIONS FOR NON-RESIDENT BUYERS

Do I need to come to Canada to buy a property?
You can buy a property from anywhere in the world (it’s amazing what we can do with video and Skype), but note that you will be required to come to Canada to open a bank account (and yes, you’ll need a Canadian bank account if you are getting a Canadian mortgage). To take ownership of the property (we call that ‘closing’), you can do that with a notary public in the country you are in – your Canadian lawyer can take you through exactly what is required.

Where do I find a lawyer who can help me with the purchase as a non-resident?
We work with some excellent lawyers who are familiar with the intricacies of working with non-residents. We’d be happy to recommend them!

How do I sign the offer paperwork?
You don’t need to sign any of the offer paperwork in person – you can do that one of 2 ways:

1 – You can scan and email back the signed documents.

2 – As of July 1, 2015, electronic signatures are legal in Ontario, so if you’re working with a tech-savvy REALTOR (like us!), you’ll be able to sign the legal offer paperwork on a tablet or smartphone.

INSURANCE QUESTIONS FOR NON-RESIDENTS

How do I get insurance as a non-resident? What are the requirements?
It can be tricky to get home insurance if you don’t reside in Canada, but we have some excellent insurance agents we can put you in touch with.

How much will home insurance cost?
Costs for insurance depending on what you buy and where. A good insurance agent can guide you along.

MONEY QUESTIONS

What kinds of taxes will I have to pay?
There are three kinds of taxes you need to be prepared to pay: land transfer taxes, property taxes and income taxes.

When you take possession of the property, you’ll pay land transfer taxes, which in Toronto, can be significant. Land transfer taxes are based on a sliding scale dependent on the price of the property.  [Related: Land Transfer Calculator]

Every year you’ll need to pay property taxes – you can get an estimate on the City of Toronto Property Tax Calculator.

The other taxes you need to be aware of must be paid when the property is sold. In most cases, non-residents are subject to tax on any income or gains resulting from the sale of a taxable Canadian property, including residential homes, condos, vacation properties or land. When a non-Canadian-resident sells a property, the Buyer of the property must withhold and remit a portion of the purchase price to the Canada Revenue Agency (CRA). Generally this amount is 25% of the gross selling price. (Note that the actual tax owing may be different, this is just to make sure the government will get its money by stopping the money from leaving the country until they can determine what is actually owing.)

Alternatively, a Certificate of Compliance related to the sale of the property can be filed and approved by the CRA to reduce or eliminate the withholding taxes. Upon filing of this Certificate of Compliance, the 25% withholding tax required is calculated on the gross sales proceeds net of the purchase cost of the property (or in other words, the net profit).

Also, non-residents are required to file a Canadian tax return by April 30 following the year they sold their property. Generally, upon filing a tax return, part of the withholding tax is refunded to the Seller as the 25% withholding tax is usually a lot higher than the actual taxes owing. At this point, you can also claim expenses like legal fees and commissions against the income from the sale.

What kinds of closing costs can I expect?
Here are the costs you need to be prepared to pay when buying a property in Toronto.

Before Closing

  • 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)

On Closing

  • 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)
  • Ontario Land Transfer Tax – varies depending on purchase price (see our Land Transfer Calculator)
  • Toronto Land Transfer Tax (varies depending on purchase price (see our Land Transfer Calculator)
  • 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, (click here to estimate Tarion Fees)
  • 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. (amount varies

SELLING QUESTIONS

What happens when I want to sell my property?
If you want to sell your property while you’re a non-resident, you’ll want to partner with an agent who has experience helping overseas sellers. We’ve written a whole article on the topic that you can find here: [Related: How to Sell Your Property for Non-Residents].

What kinds of taxes will I have to pay when selling the property?
You’ll want to consult an accountant to get a full understanding of the taxes you will need to pay upon selling your property. Generally, you will be taxed on any income and gains in value of the property. The Canadian Government generally withholds 25% of the gross selling price until the appropriate tax forms have been completed. Alternatively, a “Certificate of Compliance” can be completed to prove the appropriate taxes have been paid, which can reduce or eliminate the withholding taxes.

YOUR REAL ESTATE TEAM

What professionals will I need to help me buy a property in Canada?
To buy a property in Canada, you’ll normally need a real estate agent, a real estate lawyer, a home inspector, an insurance agent, a property manager  and a lender. If you buy with our help, we’ll connect you to the best in the industry (and to people who have specific experience dealing with non-residents).

I want to buy a property in Canada, but not in Toronto. Can you help?
Because we work with many foreign buyers, we have developed relationships with top real estate agents across Canada. While the BREL team only sells real estate in Toronto, we’ll gladly put you in touch with someone who can help, whether you’re looking to buy property in Ottawa, Montreal, Vancouver, Oakville, Niagara Falls, Muskoka or anything in between.

RENTING YOUR PROPERTY

 What is involved in renting out my property?
There are two parts to renting out your property: finding the right tenant and then managing the property. Renting out your property involves setting a price, marketing the property, showing it to potential tenants, screening them, negotiating a lease and securing a deposit. Ongoing property management involves maintaining and repairing the property and maintaining the relationship with the tenant. How much work this involves depends on the type of property you own (for example, there’s a lot more involved in managing a house than a condo!)

Can you help me find tenants?
We help many of our investors find tenants. The cost to do is one month’s rent and involves pricing, marketing, screening and negotiating. We provide professional photography and expert guidance throughout the process.

Can you manage the property for me?
We manage many properties for our clients.  While the fees vary slightly, we generally charge a monthly fee of 6% of the gross rent for condos and 10% for houses. That fee does not include finding the tenant (that costs one month’s rent) or the actual expenses to maintain the property.

What kinds of returns can I expect?
The investors we work with have different goals: some are concerned with cash flow, others with the appreciation in the value of the property and other investors are more concerned with building equity in the property via the mortgage being paid by the tenant. Generally, as of time of writing, most investors break even with a 20% downpayment or are slightly cash flow positive. Gross yields average 4.5-6%.

Do you have other questions? We’d be happy to help answer them and lead you on the path to home ownership in Canada.

    • Melanie Piche says:

      Unfortunately owning a house in Canada does not impact the immigration process – you still have to qualify in the usual ways.

  1. Are there any special things I need to know if buying a property WITH a non resident (I am a resident)? Any changes to taxes, government documents, etc?

  2. Hi i am not a Canadian resident but i am thinking to buy a property in Canada. I read all the information on your web but i am not sure about one thing, can you please explain it for me.

    This __ An employment letter verifying income in Canadian or US dollars

    Do they want this letter from the country where i work or what ?

    • Melanie Piche says:

      That is what lenders are currently requiring from a non-resident. Residents can get a mortgage with as little as 5% down.

  3. If you are retired and not employed but both collect Social Security and/or just part-time income will you be eligible to get a mortgage if credit is good?

  4. Hi,
    I am not a Canadian resident but I am thinking to buy a property in Canada. so I have four questions:

    1) if I obtain mortgage (es. with a 35% equity), can I rent the propriety to have incoming? or I will have problem with the bank?

    2) Is a canadian resident subject to tax on any income or gains resulting from the sale of a taxable Canadian property?

    3) Is a ltd canadian company subject at the same tax like the citizen?

    4) I read you manage properties with 6-10 % cost of income. What means manage?

    Thankyou

    • Melanie Piche says:

      1- It depends on the bank. Some will require you to live in it, while others will allow you to rent it out.
      2- Canadian residents are subject to capital gains tax on the sale of any investment property – their primary residence (the one they live in) is exempt.
      3- Corporations have different tax rates than Canadians.
      4 – We can help find a tenant (cost is one month rent); the 6-10% fee is for ongoing management of the property (financials, dealing with any issues that come up with the tenant or home, etc.)

  5. I’m looking at buying a house with my non-resident boyfriend. When we decide to sell I understand that as a non-resident, if he owned the home alone, he is required to obtain a Certificate of Compliance with a holdback of 25% of the gross selling price. Does this still apply if he owns the house with a resident and if so how does this requirement impact me as a Canadian resident?

    • Brendan Powell says:

      That is a question for your accountant and lawyer. Basically though, the government just wants to make sure they get their pound of flesh (tax). As long as taxes are paid, you should be all good.

  6. As a non-resident, will I be able to obtain an investor visa to be able to come and check the investments that I have in Canada?. If so, do I have a limit to how much I can stay in the county?

    • Brendan Powell says:

      As far as I know, Canada no longer has investor visas…however, you should contact an immigration specialist. We are real estate agents.

  7. I’m a Canadian non-resident looking to purchase a property in Toronto with 35% down however I do not want to disclose income. What lender would allow that?

    • I can’t see that any lender would do that – if they are going to lend you money, they need to be confident you have the capacity to pay it back. With non-resident buyers, lenders go to greater efforts to trace where the downpayment $ came from (they’ll want to track it for at least 90 days) and they need to see that your income can support the mortgage payments (taking into consideration your other assets and liabilities, of course).

  8. Hi Melanie: I am a non resident of Canada. My son started studying at the University of Waterloo last year. His course in computer science will last for five years. Last November I was visiting Canada when I was invited to a condo launch in Kitchener. I thought it would be good idea to purchase a property instead of paying all that rent for five years.I eventually made a 15% down payment on three of the Condos. The price for each was approximately 300.000.cnd.dollars. My intention is to rent out two of the units and let my son occupy the other.I have enough funds to complete the down payments to 35% on each. They have asked me for a pre approval letter. I know what it is but could you gave me some general guidelines on what I can and cannot do.I will be back in Canada soon ,can I link with you?

  9. Thanks for the great advice and insights Melanie! Here is my situation and some questions I have to go with it.

    I’m a Canadian working abroad and I am deemed a non-resident for tax purposes. My plan is to purchase an apartment and rent it out at the end of the year.

    1. When I move back to Canada, can this apartment by my primary resident when I reside in it. If so, when I sell the apartment, will I be subject to capital gains?

    2. I am married in the country which I currently reside in, does this mean my wife and I will have to pay the additional 15% foreign buyers tax as she is not a canadian resident?

    Thanks for your help!

    • Brendan Powell says:

      Hi Andrew,

      First: as always we suggest you talk to your accountant for a definitive answer. However, as I understand it:

      1. Yes, once you move back to Canada you can move into and designate that apartment your principal residence for tax purposes. The smart thing to do would be to get a valuation at that point–any Further gain in value would then be exempt from capital gains tax when you ultimately sell. Any gain that happened up to that point would be taxable–as I understand it. We are sometimes asked to give Opinions of Value for our clients moving to or from overseas for this reason.

      2. As the foreign buyer tax is only Vancouver I don’t have any experience on this front, but there is plenty of info on the BC government website. Here is one bulletin with some details:

      http://www2.gov.bc.ca/assets/gov/taxes/property-taxes/property-transfer-tax/forms-publications/is-006-additional-property-transfer-tax-foreign-entities-vancouver.pdf

      It looks like you would be exempt as a Canadian citizen but as I say this is not my department.

  10. Hi,

    I am a Canadian Citizen who had lived outside Canada for more than half a year. In this case, would i consider as a non-resident buyer that needs to pay 35% downpayment when buying a condo?

    By any chance that i can still have the 5% downpayment as other Canadian Citizen migth have?

    Thanks a lot!

    • Brendan Powell says:

      As I understand it, in most cases you would be considered non-resident…the important person to ask would be the bank! It’s not the government or realtors that make this rule–it’s each individual lender. Speak to a mortgage broker for specifics on your situation. Start with our People We Trust page.

  11. Hi, I am considering buying an apartment in Toronto as a non-resident. I have two questions, where you might help:
    1. Do I need to pay 25% tax rate on gross or net income? Can I subtract expenses like interest on mortgage, fees and commissions, depreciation on the property, etc?
    2. My country – Russia – has a lower personal income tax – 13%, and there is a tax treaty between the two countries – can I reduce the tax rate to 13%?
    Thank you in advance for your help

    • Melanie Piche says:

      1 – You should check with your accountant to confirm your specific circumstances, though taxes are normally paid on net income (after expenses).
      2 – The tax rate in your own country does not impact what the taxes you have to pay in Canada. Some countries will require you to pay taxes in your home country in addition to any taxes owed in Canada.

  12. hey ,
    I’m planning to study master degree on Canada and live there for the rest of my life .
    I’m planning to apply for immigration then become an citizen .
    if i buy an house or get on any business on Canada , does that raise my chances? and if so how much it cost me for the process , i heard you should buy a house for 150000$ and after 3 years you become an citizen after apply

    • Melanie Piche says:

      Buying a house here does not impact your chances at immigration, and there is no automatic citizenship after 3 years. Houses in Toronto average $1.3 dollars…not sure where you could buy something for $150,000.

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