QUESTION: I am a Canadian working in the US. I plan to return to Canada
within 1 year. I would be a first time home buyer and want to purchase a
house prior to return. I cannot get a mortgage unless I live in the house
and am working in canada.
Can I purchase as a rental property instead?
What would be the minimum downpayment required?
Would the interest rate be higher?
How should I approach a mortgage broker?
The house would be my principal place of residence once I return.
What are the tax implications from renting while in the US, and when I
return?
Are there any regulations that I should be aware of?
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This question came from "ask a tax expert" on www.jurock.com at
http://www.featureweb.com/vancouver/experts/ask.asp?aid=121&cid
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david ingram replies:
There is no problem with your purchasing a property in Canada and there is
no reason that you cannot get a mortgage with a sufficient down payment.
All sorts of people get Canadian Mortgages without intending to live here
and without being a Canadian.
You need a good mortgage person who understands cross border issues. If the
purchase is in BC, I suggest that you contact Joan Marsh at (604) 535-9981.
She also has contacts across the country with her company so even if the
mortgage is for Ferryland, Newfoundland, I suggest that you call Joan.
You can then decide whether to rent it or not. The biggest problem with
"not" renting it is that the CCRA might decide to try and tax you as a
resident on your US Income as a deemed or defacto resident of Canada because
you have a house available to you. They won't win because as a defacto
resident, you get to deduct the US income on line 256 under Article IV of
the US / Canada tax treaty, but the paperwork is a pain in the neck. We can
certainly look after it for you though.
I can't answer the other questions about down payment and interet rates. I
have been a realtor off and on since 1965. In that time I have seen
non-residents buy significant homes with nothing down and take money out of
the deal. your down payment could be anything from zero to 50% of the
properety value depending upon the property, where it is located, and how
desparate the vendor is to sell. For instance, in 1969, I bought the house
I live in now for $42,000, nothing down and no payments for five years on a
second mortgage which the vendor carried. He was absolutly desparate to get
out of the property and the market was soft. I have bought over 100 houses
over the years for "nothing down".
Interest rates are usually slightly higher for non-residents. However, if
you bought a spec house from a builder who has been stuck with it for a
while, the builder may subsidize the rate.
If you buy from a desparate individual, they might sell to you on an
agreement for sale and carry the paper themselves.
"EVERY" property has a different set of circumstances. Just remember that
10% of properties are in real distress at any one time and if you like one
of them, you, the buyer, are in command of the deal.
If you rent it while in the US, you will have to get an agent to look after
the property and I am going to send you another
email that went out earlier today dealing with the tax return part.
Hoping this helps, I remain
David Ingram of the CEN-TA Group
US / Canadian Real Estate Specialists
US / Canada / Mexico tax and working Visa Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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