International Buyers and Investors
Buying Property in Canada - INTERNATIONAL BUYER
The bottom line is that buying real estate in Canada is easy*.
From a residency point of view, if you plan to stay in Canada for 6 months or less each year, the government considers you a non-resident, which means that you can still open a bank account and buy property, etc. If you plan to live in Canada for more than 6 months per year, you must apply for immigrant status, especially if you are a foreign buyer, you should visit Citizenship and Immigration Canada at www.cic.gc.ca to fully understand your requirements and processes.
As your REALTOR®, I will help you secure a mortgage, find your property and draw an offer for you. Once the offer is made and accepted, a deposit is payable. When buying a house in Canada, an offer must be made in writing so that all aspects of the transaction are clearly outlined within the offer. Once you (the buyer) have signed the document, it becomes legally binding. If you withdraw from the offer at this stage, you may lose your deposit and may also be sued. I will make sure that every item staying in the property, eg. carpets, fixtures and appliances, is written on the offer as 'chattels included'. I will also insert two important clauses stating that the offer will only proceed subject to building inspection and that you as the buyer are able to meet your financial obligations. I will also ensure that anything else of importance is covered (for example, making sure a pool is in working order, etc.). Once your offer is complete it will be presented to the seller and negotiations are made. This may include changes in price, completion date and chattels. The changes are initialled by the seller and returned to you (the buyer) for your initials. The resulting Agreement of Purchase and Sale will state the purchase price and the deposit. The deposit is placed in a trust account and is credited towards the purchase price once the offer has been accepted by both the seller and the buyer and the transaction is complete.
Mortgage - INTERNATIONAL BUYER
If you are planning to purchase property in Canada without any Canadian financing at all, then the government is all you really have to concern yourselves about. However, most foreign buyers need some kind of financing.
A-lenders Financing - Big-bank mortgages that assume that you are very low-risk, due to your higher, minimum down payment.
As a Canadian resident, financing is typically available at 75% of the purchase price for a primary residence over a 25-year term. For a non-resident, the ratio is generally 60% mortgage and 40% as a down payment. Qualifying for the mortgage financing is probably the same as in other countries - interviews via phone, fax, e-mail to gather personal information which includes assets/liabilities, employment and/or income information. Each borrower's application will be considered on a case-by-case basis. As your REALTOR®, I will be able to advise you on suitable mortgage brokers.
The mortgage approval may take approximately 24-48 hours after application and documentation has been submitted to the lender. The documentation generally required is income verification, tax returns, credit bureau or bank's report (letter from borrower's own bank stating that all accounts are in good standing to date), down payment confirmation via bank statements, copy of 2 pieces of ID and real estate appraisal. Foreign banks cannot register mortgages in Canada, so any mortgage would have to be raised via a Canadian mortgage broker.
The borrower will require the services of a Canadian lawyer or notary public to prepare the mortgage documents and registration at the Land Titles office. Documents can be couriered outside Canada for signing - this will need to be arranged with the lawyer and lender well in advance of the completion date. I am happy to refer you to excellent local real estate lawyers.
B-lenders Financing - financing companies that are in the business of taking on a greater risk, and thus have higher interest rates, due to your lower down payment of 30% down or less.
For less than 20% down, under Canadian law, you must take on Mortgage Insurance.
To get Mortgage Insurance, you must satisfy the following parameters:
- You must have a minimum three months employment in Canada
- You must have a valid work permit, or have obtained Landed Immigrant status
- At least 5% of the down payment must be from the borrower's own source (not gifted)
- All debts held outside of the country must be included in the total debt servicing ratio
- Rental income from out-of-country cannot be used
- The documents you must produce are: - Valid work permit (or verification of Landed Immigrant status); - Income confirmation (letter of employment AND a recent pay-stub); - Down payment confirmation (Money lust be a Canadian bank account - at least 5% of down payment to be in a Canadian bank account for a minimum of three months) - Purchase & Sale Agreement
For 10% down payment:
- You must produce a Letter of Reference from a recognized financial institution OR six months of bank statement from your primary account
- You must have at least APPLIED to be a Permanent Canadian Resident
For 5% down payment:
- You must produce an International Credit Report demonstrating a strong credit profile, OR
- Two alternative sources of credit demonstrating timely payments (no arrears) for the past 12 months: - Rental payment history confirmed via letter from landlord and bank statements - One other alternative source (hydro/utilities, telephone, cable) to be confirmed via letter from service provider OR 12 months billing statements
- You must BE a Permanent Canadian Resident
You also may want to consider to combine financing from your originating country (possibly re-financing your current residence) with financing from a Canadian lender, if you'd like.
Some terms you might come across when dealing with Canadian Mortgages for International Buyers are:
- Payment Hypothecation - six months pre-paid, collected as an advance and put into trust, typically released after 12 months of satisfactory repayments.
- Assignment of Rents - for Investors, a document registered on the title of the property allowing the lender to collect rent directly from the renter, should the current mortgage go into default.
FOR ALL INTERNATIONAL BUYERS, naturally, you must pay Property Taxes, and initially, a Land Transfer Tax. Property taxes run close to 0.8% of the purchase price, and you can find out the Land Transfer Tax using my calculator here. Also, before investing into Canadian real estate with the intent of becoming a Permanent Resident, it is advisable to thoroughly investigate what is available in the area, and should visit the city before buying. Naturally, if you are just investing, a trusted knowledgeable real estate agent can help you with all matters regarding this remotely.
Realtor's Fees are paid by the vendor and are averaging around 5% of the home's market value. HST of 13% is also applied to the Realtor's commission and is payable by the vendor.
Appraisal Fee Your lender may require a property appraisal at your expense. The cost is between $150-$350.
Survey Fee Your lender will require an up-to-date survey. If the Seller does not have one, you will have to pay to have one done. This can be approximately $250-$500.
Lawyer's Fees Lawyers review the Offer to Purchase, search the title, draw up mortgage documents and tend to the closing details. The fee will be approximately $1000-$1,500 (including disbursements). This amount varies depending on the complexity of the sale and the type of property.
Home Inspection Fee is usually around $450. This is the equivalent of a survey in the UK and other countries and is carried out at the purchaser's request.
Property Insurance which covers the replacement value of the structure of your home and its contents.
Service Charges can be in the region of $45-$85 to hook up new services and utilities.
Condominium (Strata) Fees are charged monthly and cover building insurance and maintenance. The building’s property manager will provide you with the fee. For a newly built condo worth $250,000, expect to pay approximately $300 per month (this varies from building to building). This charge will be clearly laid out in a listing.
PLEASE NOTE: The mortgage rules for Foreign Investors change often. Please consult a Mortgage Professional for the most up to date requirements.
Call me @ 416-450-4503 for more information, or to request listings of homes in
The Greater Toronto Area, Canada!
Areas I service include, but not limited to:
Toronto, Toronto Waterfront, Mississauga, Oakville, Brampton, Milton, Burlington, Markham, Pickering, Ajax, Richmond Hill, Etobicoke, Regions of Vaughn, Peel and Halton.