Buying and Financing a Second Home in Canada

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Prospective home buyers around the world are discovering the multitude of treasures that Canada has to offer. Its spectacular scenery, tremendous variety of recreational choices, rich and varied culture, comfortable quality of life and economic and political stability are just a handful of reasons why home sales by foreigners are on the rise. In addition to being an amazing place to live, Canada managed to avoid much of the economic turbulence most other countries have recently experienced, thanks to astute financial practices and careful political leadership. Within the realm of real estate, this quote from a June 2010 Washington Post article sums things up, “Home values have ridden a roller coaster in the US, while Canada has seen a remarkably stable upward trend uninterrupted by the worldwide economic crisis.”

Canadian flag

Considering a vacation home up North?

If you have embraced its motto, explored the country “From Sea to Sea”, and decided that you simply must have a home of your own here, be aware that buying property in Canada is entirely possible. However, there are a few differences you’ll need to consider.

– Before you even toy with the idea of buying a second home in Canada, make sure that your credit is squeaky clean. Canadian financial institutions work closely with their US counterparts. Moving to Canada will not excuse you from any debt, nor will you be able to finance a home purchase without a high credit score. Do not expect to receive credit from a Canadian bank right away. Even if you supply a printout of your current credit score and financial history from your US bank, it may be suggested that you establish credit in Canada by taking out a small loan, making a rent to buy purchase, or applying for a credit card.

– Throughout Canada, the purchase of real estate and property is regulated differently from province to province. As a prospective buyer, it will be up to you to gather all of the facts that will govern your property purchase as a foreigner. For example, some areas have no restrictions on foreign ownership, while some require that you must spend six months or less in the country.

The same applies if you have plans of renting the home. Check the local guidelines for rental property and adhere to them.

– There are also specific laws for each province regarding the amount and type of land that can be owned. Prospective buyers may need to register with a Canadian real estate agent unless buying a new property from a developer.

– Most Canadian homeowners have around 70% of their property in equity, which is far higher that most Americans. This fact is another indicator of the market’s stability.

– As you look further into a second home purchase, you’ll also discover that Canadian banks require between 25 and 35% as a down payment. Since it’s unlikely a US bank will finance such a purchase, be prepared!

As with any move to a foreign country, it will be your responsibility to meet all of the visa, passport, health record, and other documentation procedures.

For a property purchase, hiring a qualified, local real estate professional, and a real estate attorney are highly recommended.

The Canada Mortgage and Housing Corporation’s website is an excellent resource for anyone planning a home purchase: www.cmhc.ca/newcomers

Anna Platz is an Editor at ForTheBestRate.com, a leading mortgage rate research website, as well as the Lead Contributor to GoodCentsSavings.com, a blog about budgeting and personal finance. Anna is immersed in the world of real estate, mortgage, and home financing and is here to provide valuable resources for homeowners and soon-to-be-homeowners on buying and selling real estate, researching a mortgage broker or lender, and securing a home loan. Check back often for news, updates, and remember that you can find today's current mortgage rates at ForTheBestRate.com. My Google Profile+

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