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Buying Property in Canada
Residence and non-residence
The first hurdle is your status. If you plan to live in Canada for more than 6 months of the year then you must apply for immigrant status, however if you plan to stay in Canada for 6 months or less each year, you will be considered a non-resident by the government. As a non-resident you can still open a bank account and buy property, etc.
It is important to note, that although the majority of provinces have no restrictions on the foreign ownership of real estate and property in Canada some areas, including Prince Edward Island, In Manitoba, Saskatchewan and Alberta have differing laws. Always check with the local authorities on any restrictions on foriegn ownership of property and real estate.
Mortgages in Canada
A non-resident can usually borrow up to 65% of the purchase price as a mortgage. The mortgage approval may take approximately 24-48 hours after application and documentation has been submitted to the lender. The documentation generally required is income verification, tax returns, credit bureau or bank's report (letter from borrower's own bank stating that all accounts are in good standing to date), down payment confirmation via bank statements, copy of 2 pieces of ID and real estate appraisal.
Foreign banks cannot register mortgages in Canada, so any mortgage would have to be raised via a Canadian mortgage broker.
The borrower will require the services of a Canadian lawyer or notary public to prepare the mortgage documents and registration at the Land Titles office. Documents can be couriered outside Canada for signing - this will need to be arranged with the lawyer and lender well in advance of the completion date.
Typical Costs When Buying Property in Canada
The following illustrates the additional costs and fees incorporated when buying property in Canada. Each province has its own property tax laws so please check with your local lawyer which are applicable.
- Property Purchase Tax / Land Transfer Fees are calculated between 0.5-2% of the property's total value (not applicable in Alberta, rural Nova Scotia or Saskatchewan).
- Clearance Certificate The typical fees associated with preparing and filing a clearance certificate, paid by the seller, range from $300-$1000, depending on the complexity of the transaction.
- Capital Gains Tax is not applicable on your principal residence.
- Goods and Services Tax (GST) of 7% is only payable on newly constructed homes and is often included in the quoted sales price. New home buyers can apply for a 2.52% rebate of the 7% GST applicable on the purchase price. There is no GST on resale housing unless the home has been substantially renovated, and then the tax is applied as if it were a new home.
- Provincial Sales Tax (PST) ranges from 0-10% and again, is normally included in the quoted sale price.
- Property Tax is an annual fee levied within local communities, which means there are many different rates within each Province. Generally it falls between 0.5-2.5% of the home's market value.
- Realtor's Fees are paid by the vendor and are negotiable between 3 and 7% of the home's market value.
- Appraisal Fee Your lender may require a property appraisal at your expense. The cost is between $150-$250.
- Survey Fee Your lender will require an up-to-date survey. If the Seller does not have one, you will have to pay to have one done.
- Lawyer's Fees Lawyers review the Offer to Purchase, search the title, draw up mortgage documents and tend to the closing details. The fee will be approximately $500-$800. This amount varies between Provinces depending on the complexity of the sale and the type of property.
- Home Inspection Fee is usually around $150-$400.
- Property Insurance which covers the replacement value of the structure of your home and its contents.
- Service Charges can be in the region of $35-$50 to hook up new services and utilities.
- Condominium (Strata) Fees are charged monthly and cover building insurance and maintenance. The building’s property manager will provide you with the fee. For a newly built condo worth $230,000, expect to pay approximately $200 per month (this varies from building to building).