Foreign investors jostle for Canadian properties and mortgages in one of the world’s top 5 real estate markets.
How can you buy a property in Canada as a foreigner? And will buying a property here make it automatic or easier for you to get a permanent residence in Canada?
These are two frequently asked questions by many foreign investors and potential immigrants, especially from India, China, The Philippines, Nigeria, and next-door USA.
The Golden rule of real estate is location, location, location! Foreign investors see this in Canada and are racing to play in the highly regulated but vibrant market. Canada was ranked No1 in the world in the USA News 2020 Quality of Life index. It is also classified as one of the top 5 global real estate markets.
How to buy property in Canada as a foreigner: Your 7-step guide.
If you are a non-resident planning to buy a property in Canada and desire to immigrate later as an investor, you should follow these steps:
Step 1: Decide where you want to buy the property
Most foreigners tend to rush to popular destinations like Toronto, Vancouver, Montreal, and Ottawa. With its vast lakes, endless frontiers, beautiful mountain terrains, gardened neighborhoods, and buzzing cityscapes, you have a lot to choose from in Canada.
Your choice of city will be based on your budget, weather tolerance, family ties, cost of living, and of course the investment returns. A good real estate agent or a trusted friend or family member can guide you on which city to choose to buy your property as a foreigner.
Step 2: Connect with a realtor
It’s now time to find a real estate agent to guide your property search and start the purchase process. Most house sales are conducted through a realtor. Two in fact – one for the seller and one for the buyer. The good news is that the seller covers the 5% fee which is split by both agents.
REW and REMAX websites both provide the most updated profiles of real estate agents across Canada. You can get a realtor there to help you find a property in Canada as a foreign buyer.
Step 3: Decide the type of house
The next step is to decide on the type of property to buy as a foreigner. You have four choices:
- Condominium: Most commonly, condos are high-rise towers in urban locations. You pay monthly fees to a condo corporation that provides all the facilities and maintenance. Condos are the least expensive housing type for foreigners planning to buy a property in Canada.
- Townhouse: It is a home attached side by side to a series of other homes. Each unit has its own outside entrance but shares a common wall.
- Semi-detached: These homes have separate land and separate entrances but share a common wall and sometimes common parking. Owners are responsible for their side of the property.
- Single/Detached: This is free-standing, and you own the land and the home. Because you are responsible for all related costs yourself, it tends to be the most expensive type of housing. The benefit is that you have more space and more control.
You will find hundreds of thousands of homes listed for sale across the country for foreign buyers searching for properties in Canada. Browse through and then narrow down your choice.
Ardi Honarmand, a platinum access VIP agent and owner of Condo on the Six, advised foreign buyers “not to be carried away by glamorous photos or fancy houses. What is most important is the right neighborhood.”
Top 7 websites for foreigners who want to buy property in Canada
CENTURY 21 Canada
Step 4: Get a real estate lawyer
After finding the property, you will need to have a lawyer at hand to take care of the legal angle of the transaction. The lawyers would review the paperwork, conduct a title search, register the deeds, and look after the transfer of funds from buyer to seller.
Step 5: Place an Offer to Purchase
Now that you have found the property that fits your budget, lifestyle, family, and investment goal. Now it’s time to make it official by making an “Offer to Purchase”. Your real estate agent will help you prepare the Offer.
This formal offer will include the purchase price, deposit commitment, closing date. (the date you take possession of the home) – usually 30 to 60 days from the date of agreement.
Step 6: Arrange the funding: Full payment or mortgage
You have the option of either making full payment for the property or getting a mortgage from a Canadian bank at the agreed closing date for the transaction.
Option 1: Full payment
If you are making the full payment, the funds would have to be wired directly to the lawyer from your overseas bank account or Canadian bank. The banks are very strict about money laundering. So be prepared to show the source and trail of the funds.
Option 2: Getting a mortgage in Canada as a foreign investor
Most homebuyers rely on banks to lend them money to buy their homes. This loan, called a mortgage, is repaid by through regular payments over a period, typically 25 years (Amortization Period). Interest rates in Canada are very low compared to most other countries. Mortgage rates presently range between 2-3%. Foreigners looking to buy a property in Canada will be stunned at this low rate.
If you are a foreigner, the bank can lend you up to 65% of the purchase price of the property, while you bring in the down-payment of 35%.
If you are seeking a mortgage, you should expect plenty of interviews and demands for endless documentation and information. The mortgage qualification rules are quite stringent even for Canadian citizens. It will be difficult for foreigners to get a mortgage because they do not have a financial record and a credit history here. But it is not impossible.
Step 7: The closing day and it’s your house!
The day and time will be set. Once the funds reach the lawyer, you can now collect the sales agreement documentation as well as the keys.
You have now succeeded in buying a property in Canada as a foreigner. You did it!
Other things you need to know about buying property in Canada as a foreigner.
To qualify for a mortgage in Canada as a foreigner, what documents would the banks need?
- Clear proof of income (letter of employment, pay stubs and income tax returns, property investments Etc.
- Proof of down payment (bank statements for the last 90 days)
- Reference letter from a bank outside Canada
- Report from an international credit bureau or bank statements for the last six months
- Sources of current and future income
Do non-residents need to be in Canada at any time to buy a property?
Usually, non-residents will need to be in Canada at least twice to complete the process of financing and buying property.
First, a buyer will need to visit Canada to open a Canadian bank account. Second, non-residents must be present at closing, as there is no power of attorney options for the closing process.
Will buying a property help your immigration to Canada?
This is a very popular question. Presently, there is no immigration option attached to buying properties in Canada. You might however qualify under a different investment immigration program in a separate application.
So do not expect an automatic visa approval to immigrate to Canada by purchasing a residential, commercial, or industrial property alone. You still have to apply to immigrate to Canada through one of the Government immigration programs.
The good news and the bad.
You now have the 7 steps on how to buy a property in Canada as a foreigner. Is this your time for Canada? “The bad news is time flies. The good news is you’re the pilot”.(M Altshuler)