– Updated April 26, 2017
Do you live outside of Canada? Thinking about getting into the Canadian real estate market? We’ve put together this quick guide to the basics of buying property in Canada. To get an even deeper understanding, make sure to check out our Frequently Asked Questions for Non-Resident Buyers.
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.
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.
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 in our experience, they are still very attractive rates).
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.
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.
Making an Offer
In this day and age, signing the legal documents to make an offer on a house or condo can be done digitally, and with Skype and Facetime, it’s easy to get the same price advice and information from your REALTOR that you’d get if you were physically in Toronto. Many lenders require a foreign buyer to sign the mortgage paperwork in person (though this can be avoided with an executed Power of Attorney).
Choosing a REALTOR
While all the usual tips to choosing a top REALTOR still apply, if you’re a non-resident looking to buy property in Canada, it’s important to work with someone who knows the intricacies of foreign ownership. Look for a real estate agent who has experience selling properties to non-Canadians and can refer you to property managers, lawyers and appropriate lenders for your circumstances. If you’re looking to buy a Toronto property while overseas (vs. during a trip to Toronto) look for a REALTOR who is experienced in previewing properties for absentee clients and who is familiar with the tools and technology (especially video) to ensure a smooth process.
We work with a lot of overseas clients and have perfected a process to video and communicate with our buyers about potential properties to eliminate the need to be physically in Toronto to choose a property to buy. We have a dedicated team of lenders, lawyers and insurance brokers who help our non-resident Buyers.
Note: the BREL team helps Buyers and Sellers in the Greater Toronto area and cannot provide guidance or assist in purchases made outside of Toronto.