Can an American Buy Property in Canada?

Of course, Americans can buy property in Canada, but the process can be a bit complex. This article reviews everything you need to know about buying property in Canada as an American, including the legal requirements, taxes, financing options, and more.

Legal Requirements for Purchasing Property in Canada

Before buying property in Canada, Americans must comply with specific legal requirements. First, you must have a valid passport or other government-issued identification. You also need to obtain an Individual Tax Identification Number (ITIN) from the Internal Revenue Service (IRS) in the United States.

Additionally, non-residents of Canada who purchase property must register with the Canadian government and obtain a Canadian Non-Resident Interim Land Registration Number (ILRN). This number is needed to complete the transaction and pay the correct taxes.

Taxes and Fees Associated with Buying Property in Canada

When buying property in Canada, it’s essential to understand the taxes and fees of owning a property. Americans who purchase property in Canada are subject to the same taxes as Canadian residents, including property and capital gains taxes.

Additionally, non-residents must pay a 25% withholding tax on any rental income earned from the property and a 25% withholding tax on any capital gains when the property is sold. It’s essential to consult with a tax professional to ensure you are fully aware of your tax obligations.

Financing Options for American Buyers

Financing options for American buyers purchasing property in Canada can be limited. It’s essential to shop around for lenders who offer financing to non-residents, as not all banks will work with foreign buyers.

One financing option is to obtain a mortgage from a Canadian bank. However, this can be difficult for non-residents, as many banks require a Canadian credit history and proof of income. Another option is to obtain a mortgage from a US-based lender, though interest rates may be higher.

Finding the Right Property in Canada

When searching for a property in Canada, it’s essential to consider factors such as location, property type, and amenities. Working with a real estate agent familiar with the area can help you find the right property to fit your needs and budget.

Closing the Deal: The Purchase Process

The process of purchasing property in Canada is similar to that in the United States. Once you have found a property you are interested in, you will make an offer to the seller. If the request is accepted, you must provide a deposit, typically 5-10% of the purchase price.

Next, you must hire a real estate lawyer to review the purchase agreement and meet all legal requirements. Finally, the transaction will close, and you will take possession of the property.

Maintaining and Managing Your Canadian Property

Owning a property in Canada as an American requires ongoing maintenance and management. This includes paying property taxes, maintaining the property, and finding tenants (if applicable). It’s essential to have a plan to manage your property, whether you plan to live there full-time or use it as a vacation home.

Can I buy a house in Canada as a non-resident?

Yes, you can buy a house in Canada as a non-resident, but there are some things to keep in mind:

There are no federal restrictions on non-residents buying residential property in Canada. However, some provinces have additional rules.

You’ll likely have to pay a higher down payment – typically at least 20% to 25% rather than the 5% required for residents. This is due to risks for lenders.

Mortgage interest rates for non-residents are usually higher – up to 1% more – due to the added risks for lenders.

Some provinces charge foreign buyer fees when non-residents purchase the property. This can range from 2-20% of the property value. For example, in BC, there is a 15% tax for non-resident buyers in Metro Vancouver.

You’ll need to go through the home buying process with a Canadian real estate agent, lawyer/notary, and mortgage broker who are familiar with requirements for non-residents.

Income from the property – like rent and capital gains – will be taxed by Canada. You may need to file Canadian tax returns to report this.

Some central banks in Canada offer mortgages to non-resident buyers. However, many smaller lenders do not.

You may face additional challenges managing and maintaining the property from outside of Canada. Consider hiring a property manager.

Buying property as an investment and not using it as a primary residence can affect your tax liability and filing requirements in Canada and the U.S.

Can I move to Canada if I buy a house?

Buying a house in Canada does not automatically allow you to move and live there permanently. There are a few essential things to keep in mind:

• Buying a house in Canada as a non-resident does not grant you any immigration or residency status. You would still need to apply through the normal immigration channels.

• As a real estate investor or absentee landlord, you can manage Canadian property outside the country. But to move there, you will need a visa or permit.

• There are different immigration programs you could apply for, depending on your situation.

Options include:

• The Provincial Nominee Program, where certain provinces nominate immigrants and fast-track their applications.
• The Federal Skilled Worker program requires in-demand work experience, training, language skills, and a job offer.
• The Investor Immigrant program provides a visa in exchange for a qualifying investment in Canada (at least C$800k – 1.6 million).

• Once approved for permanent residency or a visa, there are time limits within which you must move to and live in Canada. Not following the requirements can lead to losing your status.

• Even if you only want to stay in Canada part-time or seasonally, you’d still need a visa authorizing multiple entries – either a temporary resident visa or a permit.

• Canadian immigration is point-based and very selective. Critical factors are language proficiency, in-demand work experience, age, education, and arranged employment.

Where to Buy Investment Property?

FAQs

What is an Individual Tax Identification Number (ITIN)?

An ITIN is a tax processing number issued by the IRS to individuals not eligible for a Social Security number. It is required for non-residents of Canada who wish to purchase property in Canada.

What is a Non-Resident Interim Land Registration Number (ILRN)?

The ILRN is a number assigned to non-residents of Canada who purchase property there. It is required to ensure that non-residents pay the correct taxes.

What taxes do non-residents of Canada pay when buying property?

Non-residents of Canada who purchase property are subject to the same taxes as Canadian residents, including property and capital gains taxes. They must also pay a 25% withholding tax on any rental income earned from the property and a 25% withholding tax on any capital gains when the property is sold.

Can non-residents of Canada obtain a mortgage from a Canadian bank?

It can be difficult for non-residents of Canada to obtain a mortgage from a Canadian bank, as many require a Canadian credit history and proof of income. However, some lenders may work with foreign buyers, so shopping for the right lender is essential.

Do I need to hire a real estate lawyer when buying property in Canada?

Yes, hiring a real estate lawyer when buying property in Canada is strongly recommended. A lawyer will review the purchase agreement, ensure all legal requirements are met, and help protect your interests throughout the transaction.

Can I rent out my Canadian property as a non-resident?

Yes, non-residents of Canada can rent out their Canadian property. However, they must pay a 25% withholding tax on any rental income earned from the property.

Conclusion

Buying property in Canada as an American can be a complex process, but it can be a rewarding investment with the proper preparation and guidance. By understanding the legal requirements, taxes, financing options, and purchase process, you can make informed decisions and find the right property to fit your needs.