Toronto is an excellent city for foreign buyers to purchase real estate. Canada’s political and economic stability, the city’s high rankings for investment value and quality of life, and cosmopolitan lifestyle make Toronto an attractive for a primary or secondary residence.
The ability to purchase property in Canada isn’t tied to citizenship, meaning you do not need to be a citizen. Foreign investors from all countries can buy any type of real estate. Be aware property ownership does not provide immigration or visa privileges.
Why Buy in Toronto
One major benefit to purchasing in Toronto over another major city like Vancouver is the lack of foreign buyer tax. This year Vancouver implemented a 15% foreign buyer tax on real estate; Toronto does not have such legislation in place. That means foreign buyers are responsible for the same land transfer taxes as Canadian residents.
When closing a real estate purchase, non-residents pay the same taxes as residents: land transfer taxes, property taxes, and income taxes. In Toronto, land transfer taxes are based on a sliding scale that matches the purchase price of the property.
How to Acquire a Loan
Foreign buyers should be prepared to demonstrate the financial means to close a sale. If a mortgage is required, Canadian lenders often require a significant down payment, with 35 per cent a common figure. Interest rates vary by institution and your financial status. Canadian lenders will want to verify all of your financial details. Be prepared for questions regarding your income and credit status. Some foreign buyers find questions into their financial status invasive, but it is necessary before Canadian financial institutions will complete a loan.
Canadian lenders often require the down payment to be in a Canadian bank for a period of time before closing. Be prepared to open an account have funds available. Lenders often prefer to trace the down payment source back several months.
Selling Your Canadian Real Estate
Foreign buyers do need to be prepared to notify the Canada Revenue Agency when selling Canadian property as a non-resident. There are tax rules surrounding capital gains for the property’s sale. Foreign buyers should consult with a tax attorney or accountant before deciding to sell to understand the process and penalties.
Property Insurance as a Foreign Buyer
As a foreign buyer taking out a loan, obtaining insurance can be a challenge. Mortgage lenders require proof of insurance to protect their investment in your property. Foreign buyers tend to encounter more roadblocks and higher fees than Canadian citizens when acquiring home insurance. Barry Cohen has coordinated with foreign buyers and insurance companies to secure appropriate information during real estate transactions. Ask Barry about which lenders are willing to work with overseas buyers.