RESIDENCY QUESTIONS FOR NON-RESIDENTS
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 warmly welcomes homebuyers from all nations, and there are no restrictions on the type or quantity of real estate you can acquire. Some financial institutions may impose a limit of up to 5 properties per individual. As of October 25, 2022, a 25% Non-Resident Speculation Tax applies to non-citizens, corporations, and trusts acquiring property in Ontario. Please refer to the full details here.
Important Note: The Government of Canada has recently enacted a temporary Foreign Buyer ban, prohibiting non-Canadians from purchasing residential property in Canada for a two-year period, commencing on January 1, 2023. The following information remains relevant, but updates will be made as necessary after the ban expires in 2025.
Will buying a property in Canada improve my chances of immigration?
Owning property in Canada does not directly affect your eligibility for immigration. Although it can contribute to your overall net worth, it is not a determining factor in the immigration process. To assess your eligibility for immigration, please 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 real estate purposes if I'm an expat? Canadian citizens residing outside Canada for more than half of the year are generally regarded as non-residents by financial institutions but not by the government for the purposes of the Non-Resident Speculation Tax. Canadian citizens are not subject to the 25% 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? When purchasing property with a non-resident co-buyer, Canadian banks will classify you as a non-resident, subjecting you to the same requirements, including a higher down payment. However, if you are acquiring property with a spouse who is a permanent Canadian resident, you are typically exempt from 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, Canadian banks and lenders generally require non-residents to provide a minimum 35% down payment. This means you must pay 35% of the property's cost in cash, with the remaining 65% potentially covered by a mortgage. Requirements may vary among banks, with some being more stringent 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 typically need to fulfill several criteria, including a 35% down payment (not from gifted funds), a reference letter from their bank, an employment letter verifying income in Canadian or US dollars, three months of bank statements, and a 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 Canadian citizens provided they meet the mortgage eligibility requirements. If your country lacks a tax treaty with Canada, you may only qualify for a fixed-rate interest.
Will Canadian banks consider rental income as part of my income?
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Most lenders will consider rental income only from Canadian properties. Rental income from properties outside of Canada is generally not factored into your income for mortgage qualification.
How long does the down payment have to be in a Canadian bank?
Typically, most Canadian banks require that your down payment remains in a Canadian bank for 30 days before the property's closing. Additionally, most banks will want to trace the source of your down payment for the preceding 90 days.
What's a deposit, when do I need it, and how do I pay it?
Upon making an offer on a property in Canada, you'll be required to provide a deposit, typically around 5% of the purchase price in Toronto, within 24 hours. This deposit is held in trust by the listing brokerage and becomes part of the down payment at the property's possession. Opening a Canadian bank account is advisable to facilitate deposit payment, whether via certified cheque or wire transfer.
Can you recommend a mortgage broker experienced in assisting non-residents purchasing property in Canada?
Our team offers comprehensive support for non-resident clients. By working with myself and The Fresh Approach team, you gain access to mortgage lenders, lawyers, home inspectors, and insurance agents who possess extensive experience in non-resident property acquisitions and investments.
What kinds of closing costs should I expect to pay?
As a non-resident, you will incur the 25% Non-Resident Speculation Tax and other standard closing costs, including land transfer taxes and legal fees. First-time buyer programs and land tax rebates from the Canadian government do not apply to non-residents.
I don't need a mortgage. How do I pay for the property?
If you possess 100% of the funds in cash to purchase a property, you can proceed without a mortgage. This money should be transferred to your lawyer before the property's closing.
Home Buying Process Questions:
Do I need to come to Canada to search for a property?
We've successfully assisted many non-resident buyers in acquiring property while residing overseas. Our team employs video, live walk-throughs via Skype or Facetime, and interactive online tours to facilitate remote property inspections. Having a family member or friend in Canada to assist with the home search process can also be beneficial. It's important to note that, if you require a mortgage, you'll need to open a Canadian bank account, as Canadian banks typically require an in-person visit for account setup. There are exceptions, such as clients with HSBC accounts who have secured mortgages without visiting Canada.
I want to buy a house. Can you recommend a home inspector?
When you collaborate with myself and the Fresh Approach team, you gain access to our network of trusted partners, including home inspectors, handymen, painters, contractors, plumbers, and electricians.
If I buy an investment property, can you find tenants for it and manage it for me? Our team assists numerous landlords in finding tenants for their properties, and we even have a property manager on staff. While these services come with additional costs, they offer peace of mind to non-residents who wish to own investment properties.
Legal Questions for Non-Resident Buyers:
Do I need to come to Canada to buy a property?
You can purchase a property from anywhere globally, with the help of video and Skype. However, opening a Canadian bank account is typically necessary if you intend to secure a Canadian mortgage. To finalize the property's ownership (closing), this can often be accomplished with a notary public in your residing country, guided by your Canadian lawyer.
Where do I find a lawyer who can help me with the purchase as a non-resident? Our team collaborates with reputable lawyers experienced in handling non-resident transactions. We are happy to provide recommendations.
How do I sign the offer paperwork?
You do not need to sign offer paperwork in person. You can either scan and email the signed documents or, as of July 1, 2015, use electronic signatures, which are legally accepted in Ontario. A tech-savvy REALTOR can guide you through the process of signing offer paperwork electronically.
Insurance Questions for Non-Residents:
How do I get insurance as a non-resident? What are the requirements?
Obtaining home insurance as a non-resident can be challenging, but we have excellent insurance agents who can assist you. Insurance costs vary depending on several factors, and a knowledgeable agent can provide guidance.
Money Questions:
What kinds of taxes will I have to pay?
If you are buying property in the Toronto region, you should prepare for four types of taxes: the Non-Resident Speculation Tax, land transfer taxes, property taxes, and income taxes.
The Non-Resident Speculation Tax is equivalent to 25% of the property's price, paid upon closing. Land transfer taxes are due upon property possession and are determined on a sliding scale based on the property's price. Property taxes are an annual obligation, and you can estimate them using the City of Toronto Property Tax Calculator.
If you buy an investment property and receive rent from tenants, you will be required to pay income tax on that rental income, similar to any other Canadian income. An accountant can assist you in remitting this tax to the government and filing a Canadian tax return. Additionally, when selling a taxable Canadian property, non-residents are subject to Capital Gains Tax, typically 25% of the gross selling price. A Certificate of Compliance can potentially reduce or eliminate withholding taxes upon approval by the CRA. Non-residents must also file a Canadian tax return by April 30 following the year of property sale.
What kinds of closing costs can I expect? When purchasing a property in Toronto, you should be prepared to cover several costs:
Before Closing:
On Closing:
Selling Questions:
What happens when I want to sell my property? If you intend to sell your property as a non-resident, it is advisable to work with an agent experienced in assisting overseas sellers. For a more comprehensive understanding of the taxes you'll need to pay upon selling your property, it's recommended to consult with an accountant. Generally, you will be taxed on any income and gains in the property's value. The Canadian Government typically withholds 25% of the gross selling price until the necessary tax forms are completed. An alternative is to complete a "Certificate of Compliance" to demonstrate the payment of appropriate taxes, which can reduce or eliminate 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 will typically require a real estate agent, a real estate lawyer, a home inspector, an insurance agent, a property manager, and a lender. When you work with our team, you gain access to industry experts, including those with specific experience in assisting non-residents.
I want to buy a property in Canada, but not in Toronto. Can you help? Our team primarily focuses on real estate in the Toronto area. However, we may be able to recommend an agent in other major Canadian cities.
Renting Your Property:
What is involved in renting out my property? Renting out your property involves two key aspects: finding the right tenant and property management. This process includes setting a rental price, marketing the property, showing it to potential tenants, conducting tenant screenings, lease negotiations, and deposit security. Property management encompasses ongoing property maintenance, repairs, and tenant relations. The extent of work depends on the property type.
Can you help me find tenants? We assist many of our investors in finding tenants for their properties, including pricing, marketing, screening, and negotiation. We provide professional photography and expert guidance throughout the process.
Can you manage the property for me? Our team manages numerous properties for clients. While fees may vary slightly, we typically charge a monthly fee of 6% of the gross rent for condos and 10% for houses. This fee does not cover tenant finding (one month's rent) or actual property maintenance expenses.
What kinds of returns can I expect? The returns on investment properties vary depending on your goals, whether it's cash flow, property appreciation, or building equity through tenant mortgage payments. As of the current time, most investors achieve a break-even point or slight cash flow positivity with a 20% down payment. Gross yields generally average between 4.5% to 6%.
Do you have other questions? We are here to assist and address any further questions you may have, guiding you towards successful home ownership in Canada.
