Socialized healthcare, affordable education, accessible public transit, strikingly beautiful green spaces, and environmentally conscious living— these are only a couple of reasons why so many people are deciding to move to Canada. If you're looking to move to Toronto and you're planning to buy a property there and you're not a citizen of Canada there are a couple things you should know about.
The whole home-buying process depends on whether the buyer is a resident or a non-resident of Canada. 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. Even Canadian citizens who leave the country for more than 6 months are considered non-residents and subject to the same rules as non-residents without Canadian citizenship.
Buyers from all countries are welcome to buy as many properties as they want in Canada, there are no restrictions on the number of properties a foreigner can own. However, as of April 21, 2017, a buyer who is not a citizen or a permanent resident—and this includes trusts and corporations—has to pay a Non-Resident Speculation Tax which amounts to 15% of the purchase price and needs to be paid at closing.
Financing Your Purchase
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. 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.
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.
Getting Home Insurance
It may also be slightly more challenging, or at least more expensive, for a non-resident to secure insurance. Since you will need a proof of home insurance in order to be approved for a mortgage, it is advisable to get insurance quotes from a reputable agency BEFORE making an offer on your investment property.
Canadian Taxation Rules
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. There are some exceptions. The NRST doesn't apply to:
- principal residence of a foreigner under the Ontario Immigrant Nominee Program
- a buyer whose spouse is a Canadian citizen, permanent resident, refugee or exempt under the Ontario Immigrant Nominee Program, if the buyer is buying together with their spouse
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.
Rebates of the NRST are possible if:
- the foreign buyer becomes a permanent resident of Canada within four years of the date of the purchase
- the foreign buyer is a student enrolled full-time for a period of at least two years from the date of purchase in an approved school at a campus located somewhere in Ontario. Full time in this case means 60 per cent or 40 per cent if the buyer has a disability, of what the approved school considers to be a full course load for the academic year.
- the foreign buyer is working legally full-time with a valid work permit in Ontario for at least one year since the purchase date (at least 30 hours a week over the course of a year).
To qualify for the rebate the buyer must be the exclusive holder of the property or hold the property with their spouse. The buyer must apply for the rebate within four years after the day on which the NRST became payable, except for foreign nationals who become permanent residents:
The rebate for a foreign national who becomes a permanent resident of Canada must be applied for within 90 days of the foreign national becoming a permanent resident, and no application may be made more than four years and 90 days from the date the NRST became payable.
Along with NRST, you will also be required to pay the Municipal and Provincial land transfer taxes. The cost of taxes on homes in the Toronto area can easily be calculated here. In Toronto the LTR (Land Transfer Tax) amounts to 2% of the purchase price for the provincial tax and 2% per cent of the purchase for the city of Toronto.
If you're a first time home buyer and you want to purchase a property that will act as your primary residence, you may also be eligible for land transfer tax rebates. To qualify for the refund:
- the buyer must be at least 18 years old
- must occupy the property as their primary residence within 9 months of the transfer date
- the buyer cannot have ever owned a home, or an interest in a property anywhere in the world
- if the buyer has a spouse, they cannot have owned a home or had any interest in a home anywhere in the world, while being the buyer's spouse. If this is the case, neither spouse is eligible for a refund.
Since January 1, 2017 the maximum amount of the refund you can get for the land transfer tax is $4,000. The qualifying first time buyers buying a home under $368,000 don't have to pay the land transfer tax. For purchases above $368,000, qualifying first-time home buyers will receive a maximum refund of $4,000.
However, if you're buying a property with your partner or a friend who is not a first-time buyer, the refund will be reduced, "proportionate to the interest acquired by the individuals who qualify for the refund."
Searching for a property
After you've learned about all of the paperwork that awaits you if you decide to buy in Canada, it's time to find a property that would suit your needs.
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?
The average price of a condo in the city of Toronto was $584,381 in December 2018. Condos are aa good choice, price-wise, particularly for young professionals and newly married millennials, but they 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.) A semi-detached house in the City of Toronto went for $939,859 in December 2018, while you could buy a townhouse for $714,456 on average at the same time.
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.
The most common form of housing found in Toronto is the single family home. Though there are several common types and styles of single family dwellings, including detached, semi-detached, multi-storey, bungalow etc., the most important distinguishing factor is that such properties sit on their own piece of land (which is sold with the home).
That means that subject to by-laws and building codes, you can do with it as you wish, from painting to expansion to landscaping. If you decide to buy a detached house remember that all maintenance and repair falls on you. You are completely responsible for the upkeep costs of the property, and single family homes are also more expensive to buy, insure and pay taxes on than condos are in most urban neighbourhoods. In December 2018, the average price for a detached house in the City of Toronto was $1,145,892.
Once you've decided what kind of a property you're interested in, it's time to contact a realtor. Toronto real estate agents have a lot of experience with foreign buyers and they will make the complicated process of getting financing, getting all your paperwork in order and finally purchasing a property much easier.