– Updated April 26, 2017
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. Additionally, as of April 21, 2017, there is a 15% Non-Resident Speculation Tax that must be paid by non Citizens and non-permanent residents (including corporations and trusts) – read the details here.
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 by banks (and thus subject to all the same rules) but not by the government for the purposes of the non-resident speculation tax. Canadian citizens are not subject to the 15% non-resident speculation tax.
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. If you are purchasing with a spouse who is a permanent Canadian resident, you are not generally subject to the Non-Resident Speculation Tax.
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?
As a non-resident, you will have to pay the 15% Non-Resident Speculation Tax and be subject to the other regular closing costs, including 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.
What kinds of taxes will I have to pay?
If you are buying in the Toronto region, there are four kinds of taxes you need to be prepared to pay: the Non-Resident Speculation Tax, land transfer taxes, property taxes and income taxes.
The Non-Resident Speculation Tax is equal to 15% of the price of the property and paid upon closing. You can read all the details here.
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.
If you are buying an investment property and have tenants who pay you rent every month, the government will require you to pay income tax on that rent (just like any other income earned in Canada). A good accountant can help you remit this money to the government and fike a Canadian tax return.
The other income 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. (Known as Capital Gains Tax; the increase in value of your property over the time you have owned it is known as a Capital Gain) 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.
- 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 (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
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?
The BREL team only sells real estate in the Toronto area, though we may be able to recommend an agent in Canada’s other big cities.
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.