Canadian cities, particularly Toronto and Vancouver, are ranked as some of the most desirable in the world. Socialized healthcare, affordable education, accessible public transit, strikingly beautiful green spaces, and environmentally conscious living are only some of the criterion used to consider a move to a Canadian city, and more and more homeowners are making the choice to do so.
Exclusive communities in Toronto, such as the leafy Wychwood Park neighbourhood, are increasingly popular for newly married couples starting families; the safety and prestige provided by gated communities sets their minds at ease. Elite modern condos that scrape the sky and offer breathtaking cityscapes provide urban allure to young professionals. There is an understandable allure. But how easy is it, really, to buy real estate in Canada’s most luxurious urban areas?
Do Your Research
Location, location, location—every potential home buyer is realistically concerned with such issues as neighbourhood crime rates, proximity to good schools, and commuting distance to their workplace. Fortunately, Toronto is a relatively safe city full of opportunity and a variety of highly sought-after neighbourhood communities. Public transit is also widely available.
Without the burden of worrying about the more mundane details, prospective buyers can concern themselves with slightly more complicated odds and ends involved in the home buying process, such as finding a reputable real estate agent, predicting future property values, and calculating the true cost of renovations.
It’s crucial to have a game plan before you buy. Consider both the financial and emotional aspects of home buying—especially if you’re a first-time Canadian-home owner who might be overwhelmed with the options.
Set a Timeline and Stay Focused
Naturally, everyone has their own personal reasons for choosing to buy a home at the time they do, and not every buyer can swoop in when the housing market is perfect. In the worst case scenario, you might be forced to make a very sudden relocation due to a new job or recent crisis that has uprooted your family. In this sort of situation you might not have the time to analyze every single detail to the best of your ability, but it is still advisable to take into consideration your motive for buying a particular property.
Ask yourself some of the tough questions before you get in too deep. Do you want to buy a house, a condo or a townhouse? Are you tempted to settle for the first aesthetically pleasing property you find, just to get it over and done with? Have you considered how much renovation might be necessary? Is the home new or old? Discuss these issues with your realtor and be upfront about any deal breakers that you might have.
In the best case scenario, you are shopping around with no major time restraints, and can afford to do a bit more in-depth research before you buy. On the other hand, many people in this situation wind up "window shopping" for too long—you might find yourself attending more and more open houses, dwelling on small features you dislike, and inventing reasons not to settle on a perfectly good property. In the meantime the housing market may have changed quite swiftly. Set a timeline for yourself, and do your very best to stick to it.
Different Types of Properties
There are a variety of options available to the prospective homeowner. However, it is wise to consider all your options before making a decision on what type of property to purchase.
It’s true that the condominium market in Toronto is soaring right now, particularly for young professionals and newly married millennials, but condos aren’t for everyone, and it becomes more complicated when you consider the fact that condos can be purchased both in pre-construction (before the property is fully constructed) or in re-sale (a used property with potentially outdated amenities).
If you do feel that condo living is a good fit for you, the first question your realtor will pose is whether or not you’d like to buy in pre-construction, or settle for an older property. If you are hoping to live in a brand-new, fully furnished and updated building, buying in pre-construction can be a great option, but you may have to wait a while for the property to be completed—and there are a few things you should know before you jump in.
If you like a bit more space, enjoy being able to decorate the exterior of your home the way you wish, or would prefer the luxury of having a small yard, a semi-detached home or townhouse might better suit your needs. Pet owners and young families in particular appreciate the freedom that a townhouse allows them. (Not to mention, you don’t have to take an elevator down several floors just to get to your car in the morning.)
The interiors of townhomes are typically larger and more spacious than that of even the most luxurious condo, which makes them a great choice for those who are artistically inclined and love being able to design their living space in a way that makes them feel comfortable and at ease. There are many benefits to having a ground-floor property, but they tend to be preferable for those who are willing to put in the time to maintain landscaping, shovel snow, and get along with their neighbours.
Buying Canadian Real Estate From Abroad
Plenty of homeowners are coming from abroad, which only increases the ethnic and cultural diversity present in cities such as Toronto. It has never been a more popular or lucrative time to buy if you are a foreigner.
If you are a foreigner considering purchasing property in Canada, it will likely strike you as good news that, overall, the process is fairly simple. Whether you’re making a full-time relocation to the Great White North or you’re planning on snagging up a great investment property, you’ll find many options available to you, even if you are a non-resident of Canada. However, you will be required to go through a certain amount of paperwork.
Financing Your Purchase
If you aren’t planning on actually living and work in Canada, you won’t be considered a resident. It is important to remember that residency and citizenship are not the same thing. Residency refers to the amount of days per year that a citizen lives in Canada. If you live abroad for more than 183 days, you lose your residency—even if you’re a born-and-bred Canadian citizen. Similarly, if you have no permanent home in Canada, you will no longer be considered a resident.
If you have no plans to live in your Canadian home and hope to sell it for profit down the road, it would be wise to speak to an accountant. On the other hand, if you’re seeking full immigration status as opposed as the more common "visitor" status for foreigners, once you purchase a property, it shows the government that you have a significant connection to Canada.
There are no restrictions on the amount of property foreigners can purchase, though you should be advised that you will likely be expected to provide a letter of introduction from a bank in your native country before a Canadian bank or credit union will begin a relationship with you.
It may also be slightly more challenging, or at least more expensive, for a non-resident to secure insurance, so it is advisable to get insurance quotes from a reputable agency before making an offer on your investment property.
Financial institutions tend to be a bit more restrictive with non-residents, and local lenders will not lend to anyone who does not work in Canada unless they can provide a down payment in cash, usually upwards of 35%. All financial institutions will require verification of your income in your home country. They will examine your credit worthiness and determine whether or not they wish to allow you to qualify for a mortgage.
Qualifying for a Mortgage as a Non-Resident
You can buy a property from anywhere in the world, but will need to physically be in Canada in order to qualify for a mortgage, since you’ll need to open a Canadian bank account.
The good news is that you can easily apply for a mortgage as a non-resident and qualification is definitely not out of the realm of possibility, as long as you meet the requirements. In order to prove your credit worthiness and general fiscal responsibility, you must provide a 35% downpayment consisting of your own funds rather than gifted funds, an employment letter verifying income in either Canadian or American dollars, a letter from a bank offering you a reference, three months’ worth of bank statements, and a Canadian credit check.
Provided you meet these qualifications, you should not have difficulty acquiring a mortgage and will even be eligible for similar interest rates as Canadian citizens if your home country has a tax treaty with Canada. If your country does not have a tax treaty with Canada, you will only be eligible for a fixed-interest rate. Unsure if your country is on the list? This exhaustive list provides all the information you need.
What if You Don't Get Approved
Near the end of 2016, Canada’s Finance Minister, Bill Morneau, implemented several significant changes to mortgage rules to ensure that Canadians don’t entrench themselves into debt they can’t pay back. While the rules are meant to help Canadians stay financially secure in an economically unstable time, they have impacted potential home buyers who might otherwise find it easy to qualify.
Mortgage lending rules have undeniably become stricter in recent years, in part because of the new rulings but also because many lenders fear the consequences of beginning a relationship with a risky client. But it’s definitely still possible to obtain a mortgage—even with a bad credit rating. While it’s true that some lenders may find a credit score lower than 620 to be a risk they’re not willing to take, others will be more lenient.
After all, banks determined your overall creditworthiness by looking at a massive variety of factors, and financial institutions examine mortgage applications on a case-by-case basis. You could easily make a good case for yourself by explaining your negative credit score in your application. If you’re a young urban professional wondering if you should quit renting monthly and take the leap into home ownership, you might be surprised to learn that monthly mortgage payments for a condo in downtown Toronto are typically cheaper than what you’re paying to your landlord—and provide you with a valuable asset should you decide to sell down the road.
Citizenship and Residency
Many people are unaware that you are taxed not on the basis of your citizenship but on your residency, so non-residents may be required to pay Canadian tax while Canadian citizens who don’t live here year-round may not.
Just like residents, non-residents are also required to withhold 25% of the gross rental income of the property. It is remitted monthly to the Canada Revenue Agency. Both Ontario residents and non-residents are required to pay the same Land Transfer Tax on their sale transactions, so if you wind up selling your property in the future, keep this piece of information in mind.
The required taxes must be filed within fifteen days of the final day of each month. If you have a tenant occupying the property, they can do this; if you would prefer to go through a Canadian representative, you can choose one to appoint on your behalf. Withholding taxes has serious consequences. If you fail to file the required sales notice with the CRA, you will undoubtedly face severe repercussions.
Citizenship and Land Ownership
Land ownership is possible whether you are a citizen or not. Unfortunately, owning property in Canada does not permit you any specific immigration privileges. Not everyone is eligible for application, and different immigration programs exist depending on your purpose for extended visitation or permanent relocation to Canada. A short questionnaire can be filled out online to check your eligibility; you can expect to be asked questions relating to your age, education, work experience, income, nationality, and language ability, among others.
Although this brief survey can give you a basic idea of your eligibility, it cannot help you on the path to immigration. If you choose to move forward with your application, you will have to do so through an immigration officer in accordance with the Immigration and Refugee Protection Act.
Although owning property in Canada will not be taken into account during the highly selective and complex immigration process, and will not necessarily improve your chances at immigration, it certainly won’t hurt. Your property will be calculated as part of your net worth, and as a result, might help make a better case with your immigration officer. It will indicate that you have a significant connection to Canada.
Canadian Taxation Rules
Purchasing property in Canada might be a breeze, but tax obligations can get complicated for non-residents. As of April 2017, anyone who is not a citizen or permanent resident of Canada is subject to a Non-Resident Speculation Tax on any properties purchased in Toronto and a variety of other regions of Ontario, including Hamilton, Halton, and Niagara. This tax is 15% of the purchase price paid at closing.
Individuals as well as corporations are subject to the NRST. A foreign corporation is any corporation that is not incorporated in Canada and the shares of which are not listed on a Canadian stock exchange. The Immigration and Refugee Protection Act defines a foreign national as an individual who is neither a citizen nor permanent resident of Canada.
The NRST applies to any land containing at least one single family residence, which can include a home, a semi-detached home, a townhome, or a condominium unit. If you purchase an entire condominium building or multiple condo units, each one is considered a single family residence—so you will be taxed on each unit, not the property as a whole.
Along with NRST, you will also be required to pay three other types of taxes on your Canadian property: land transfer taxes, income taxes, and property taxes. Land taxes in Toronto tend to be fairly high, but they are calculated based on the price of your property, so your mileage may wary. As far as property tax is concerned, the cost of taxes on homes in the Toronto area can easily be calculated here, or by calling Revenue Services.