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How to Buy a Home in Canada if You Are a U.S. Citizen

Get a mortgage


The rates in Canada are so low that it makes sense to get a loan instead of tying up all your money into a home. Having liquid cash on hand can always help in case of an emergency.


You will qualify for a Canadian mortgage, but lenders will not consider at your U.S. credit score. They will look at your earnings and your ability to repay the loan. They will also expect you to put up a down-payment of 35% on the home (the quantum of the down-payment may be more in some cases).


How a Canadian mortgage is better than a U.S. mortgage


The rates advertised look similar in both countries, but in the United States, what lenders display are their base or starting rates. You would be eligible for them only if you have a high credit score. If it is poor, or come somewhere in the middle, you will be charged higher.


In Canada, things work the other way around. What is advertised are the ceiling rates, meaning this is as high as they can get. If your financials prove that you are indeed capable of paying off the loan on your Canadian home, they come down. And the stronger your capability is, the lower they go.


In other words, a Canadian mortgage is cheaper than a U.S. mortgage any day.


  • Tip: If you own a home in the United States, get a loan against that and use it to pay as much as you can for your home in Canada.

Don’t forget home insurance


In Canada, lenders insist on home insurance before they advance you a loan. You might not be familiar with insurance companies in Canada that provide home insurance, so it is recommended that you check locally for options. There are several multinational insurance companies that have a footprint in both countries. They would be happy to give you a quote for your soon-to-be home in Canada, and this paperwork simplifies things considerably.


Pay your taxes on time


The Internal Revenue Service shares information with the Canada Revenue Agency, so it is best to file your tax returns on time. All United States citizens and resident aliens (green card holders) have to pay taxes on income gained from anywhere in the world, so if you plan to rent out your Canadian home, you know what to do. You also have to pay tax on the rental income gained from your home in Canada, and this amounts to you being taxed by both countries for the same amount, but you can claim tax credits from whichever taxman you choose (only not both in the same year) and negate its impact.


Tax rates vary across provinces in Canada, so you need to do the math to find out whether it is cheaper to pay taxes to the IRS of the CRA.


If you plan to live in your Canadian home while renting out your U.S. property, you need to fill out Form T1135: Foreign Income Verification Statement if the value of your U.S. home exceeds CAD 100,000.


1 CAD = 0.74 USD or 1 USD = 1.35 CAD

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