Thinking of buying an apartment or home for your children who will be studying at university or college in Canada? You’ll need to understand a few things about Canada’s real estate market, but when it comes to worrying about restrictions, you’re actually in pretty good shape.

While that may be a relief to you, it is seen differently by Canadians unable to afford a home in cities like Vancouver or Toronto, or even Calgary or Ottawa and Montreal. That means that there is pressure on politicians to place restrictions on foreign nationals purchasing real estate in Canada. But so far, the responses by government have been limited.  

So, despite the fact that there is some anger Canada remains a fairly open market for home buying. In view of this, here are a few key tips on purchasing a home in Canada as a foreigner.

 

1. Canada is NOT Australia - You Don't Have to Worry About Selling When You Leave

When it comes to foreigners purchasing real estate, Canada is not Australia. In other words, although some taxes and restrictions on farmland have been put in place in various provinces in Canada in response to surging real estate prices, we have still not put in place restrictions similar to what Australia has had since 2010.

In Australia, if you buy a home for use as a residence, you must sell it when you leave the country and no longer reside there. This was in response to anger at the fact that foreign buyers would outbid locals to purchase a home for their children to use while studying in Australia and then hold onto the home after the kids left, limiting supply and boosting prices.

In Canada, you have no such restrictions. You bought it, you own it, for as long as you wish. At least for now.

 

2. Beware of Mortgage Restrictions from Canadian Banks

GTD Aquitaine at English Wikipedia / Public domain

[Public Domain]

When it comes to foreigners purchasing real estate, Canada is not Australia. In other words, although some taxes and restrictions on farmland have been put in place in various provinces in Canada in response to surging real estate prices, we have still not put in place restrictions similar to what Australia has had since 2010.

In Australia, if you buy a home for use as a residence, you must sell it when you leave the country and no longer reside there. This was in response to anger at the fact that foreign buyers would outbid locals to purchase a home for their children to use while studying in Australia and then hold onto the home after the kids left, limiting supply and boosting prices.

In Canada, you have no such restrictions. You bought it, you own it, for as long as you wish. At least for now.

 

3. Beware the NRST in Ontario

In Ontario, you have the Non-Resident Speculation Tax (NRST) which is 15% of the purchase price and is paid by non-citizens who are also not permanent residents. The NRST applies to purchases in what is called the Greater Golden Horseshoe Region (GGH) which is a swath of land including Niagara Falls to the Southwest, all counties/cities up to the shore of Lake Ontario to the South, Orillia and Simcoe County to the North, and essentially Peterborough County to the East.

Here’s a map of the counties involved:

Map of the Greater Golden Horseshoe in Ontario © Queen’s Printer for Ontario, 2010

© Queen’s Printer for Ontario, 2010

If you purchase a home in the high-lighted area, then you are subject to the NRST.

Unless you are eligible for a rebate. Didn’t know that? Read on:

  • If you are purchasing a home for a full-time student who will be attending an Ontario post-secondary institution, then you are eligible for a rebate of the NRST. That means you have to pay the NRST, next provide proof that you or your child is a student at an Ontario institution and then receive your rebate.
  • Foreign nationals who become a permanent resident within 4 years of purchasing a property in the GGH are also eligible for a rebate.
  • Foreign nationals working in Canada on a valid work permit for at least 1 year (at least 30 hours per week for a total of 1,560 hours over a full year) are also eligible for a rebate of the NRST.

 

4. Beware of Rental Income Taxes

If you also rent out a part of that property – say a home is purchased for a student who will be attending college or university in a Canadian city and an extra bedroom is rented out to other students – then you may be charged a 25% tax on any rental income because the parents are a non-residential owner.

 

5. Beware of Special Property Taxes in Prince Edward Island

Buildings in PEI via Leonora (Ellie) Enking from East Preston, United Kingdom / CC BY-SA (https://creativecommons.org/licenses/by-sa/2.0)

by Lenora Enking / Wikimedia Commons / CC BY-SA 2.0

If you happen to be parents whose child will be studying in Prince Edward Island, then you will be charged a higher property tax and be restricted in terms of how much property and where you can purchase the property (especially for waterfront properties).

This is unlikely to affect many parents of foreign students, but it may influence your decision to study in PEI.

However, house prices in PEI are far below what you pay in places like Toronto or Vancouver and if you are looking for a university or college to send your kid to, PEI is hardly the top choice on your list.

 

6. Beware of Agricultural Land Restrictions

Farm via https://pixabay.com/photos/sky-nature-panorama-grass-3153572/

[Public Domain]

There are restrictions on purchases of agricultural land in Alberta, Saskatchewan, Manitoba and Quebec but these are unlikely to affect parents of foreign students in their choices of where to buy a home – unless you’re studying agriculture in a city like Lethbridge in Alberta, and wish to live on a real farm.

 

7. You MUST Come to Canada to Buy Your Property

Another obvious point that you may overlook in the hustle and bustle of planning to buy a home in Canada is that you will generally have to physically be in Canada at least twice during the process of buying a home.

  • You will need to open a Canadian bank account in order to get a mortgage on a property listed in Canada. This generally entails being present in Canada although some international banks like HSBC might allow you to open an account at their Canadian subsidiary without being present in Canada.
  • You will also need to be in Canada for the closing of the purchase of the home as non-residents cannot use a power of attorney for closing a real estate deal.

So, remember to pencil in these dates along with all the other dates involved in sending a child to post-secondary school in Canada.

 

8. Be Careful of Mortgage Term Limits

With regard to the term of the mortgage you take out, non-residents generally cannot hold mortgages with a term longer than 25 years. Again, this is a restriction that will have a low impact on most decisions seeing most parents will want to pay off their child’s Canadian home in much less than 25 years.

Some banks limit mortgage terms of non-residents to 10 years but check with your bank in Canada once you have opened your account to see what terms are available to you.

 

9. Establish Credit in Canada

As a non-resident, and as a foreign national, you will have to ensure you provide timely credit information so your Canadian bank can assess the financial risk you pose as a mortgage holder. This will include standard documents like bank statements and credit agency reports from your home country or whichever country you reside in and work or do business in.

But credit scores are not something you take care of and then forget about. It’s an ongoing process that you have to follow to make sure you build a strong credit profile – even before your child arrives in Canada to study. Here are a few tips for your kids or even for you to follow:

  • Get a Credit Card as soon as you open an account in Canada and use it frequently. This will provide a history of purchases and payments. Obviously, you should make sure you always pay down your monthly balances and at least pay more than the minimum balance.
  • Pay all and any bills on time and in full whenever possible.
  • Try to keep your credit cards to a manageable number. Only one or two are all you really need.
  • Follow your credit score on a regular basis. Go here for more information on how to do that.

 

10. Pay Your Bills

Finally, remember that along with your various utilities (light, gas, cable, internet, etc.) keep in mind that you have to pay property taxes usually on an annual basis, so it’s something you might need to set up reminders for along with the rest of your bills. There may be additional taxes – like a vacancy tax in Vancouver – that you should keep track of and make sure you always pay on time.

 

In the end, accessing a mortgage in Canada is a relatively easy process, open to foreign nationals and non-residents. For the purposes of purchasing an apartment or house for your kids to study here, there are relatively few restrictions – aside from a higher down-payment and somewhat shorter terms at the longer end of a typical mortgage.

 


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