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Buying a property is a thrilling, exciting feeling a buyer might experience. People make this big purchase either to build a home where they will enjoy gazing out the window, have a good living standard, and lots of other enjoyments. Or to establish a business place where you will fulfill your other dreams. According to observations and research, owning a property stabilizes or improves your financial status. The most important step you must take before buying a property are doing your research and getting a full examination of your financial status. For instance, how much debt you have in comparison to how many assets you have. 

So when buying property in Canada, you must pay a down payment of at least 5% of the home’s purchase price in Canada. For residences between $500,000 and $1,000,000, you will need 5% of the first $500,000 and 10% of the remaining cost. The minimal down payment for houses is 20% for those worth $1 million or more. The process of buying a property is a little difficult, so through this article, you will know how to buy a property in Canada as a Canadian citizen and as a foreigner, and also get an insight into the cost of buying property and mortgage loans. So let’s dive in. 

How locals can buy property in Canada 

When buying property in Canada, you need to evaluate these 4 steps. 

1. Evaluate how much you can spend on a house

Step number one is to evaluate how much you can spend on a property. Although it isn’t always the best option, property ownership can be a thrilling experience. Make sure you thoroughly analyze the expenditure before deciding to purchase a property. The Canada Mortgage and Housing Corporation (CMHC) states that your housing expenditure should never exceed 35% of your total monthly income. Moreover, the total debt should never exceed 42% of your total monthly income. 

2. Start saving for your home 

The next crucial step is to have an overview of your savings or find saving programs. You need to understand that you need a down payment to purchase a property. Additionally, you need money to cover the initial expenses. Most firms will instantly deposit your paycheck into your savings or checking account. According to the Canadian government’s official website, setting up an automatic transfer to a savings account each pay period will increase your chances of achieving your saving targets.

You can also apply to these saving programs:

3. Purchase your own property 

Rarely, people will instantly buy a property without previous savings, investments, or mortgages. So the next step is a down payment, which is some amount of money paid for the purchase upfront. 

After this mortgage process starts, the institution will lend you some money, then you need to get mortgage loan insurance. It is important to have insurance so that lenders are protected in case of no payment. 

4. Tax credits for the new property

The last step before your big purchase is a tax credit. The government of Canada provides the buyers with two tax credit options, Provincial and territorial. It is the buyer’s choice of method to go with.   

Like other assets, real estate in Canada is taxed. Therefore, you should speak with a Canadian tax expert if you want to fully understand the financial ramifications of buying property in Canada. Both Canadian citizens and international buyers are subject to the same Land Transfer Tax (LTT). If you are a first-time home buyer and intend to use the purchased property as your primary residence, you may be eligible for a rebate of this tax. Property and income taxes are among the remaining taxes you’ll be required to pay.

How non-residents can buy property in Canada

Large communities of different cultures may be found in Canada, and many foreigners love traveling there for holidays, short-term employment, or academia. You could be thinking about purchasing real estate in Canada if you’re a non-resident who would love to make Canada your second home, you’re emigrating but aren’t yet a full legal resident, or you’re an overseas buyer trying to make a wise investment.

As a foreigner, you can buy a property in Canada. It is acceptable for non-residents to purchase real estate. They must adhere to the correct processes for buying a home, just like all buyers. This involves paying all required taxes, and non-residents also have to pay a separate tax known as the Non-Resident Speculation Tax (NRST).

1. Non-resident or foreigners can mortgage in Canada 

When considering buying a home in Canada, non-residents can obtain a mortgage. Although the interest rates are quite comparable, Canadian banks frequently demand a larger down and receive more payment from non-residents or foreigners than they do from citizens. A minimum of 35% of the home’s worth is often required as a down payment, however, different banks and lenders have different requirements. Non-residents frequently need to provide the following documents in addition to the down payment:

  • Bank reference letter
  • Employment verification letter 
  • Bank statements (at least three months)
  • Credit check

2. The cost of buying a property in Canada 

The cost of property always depends on the location, area, rates of the area, and many other factors that determine the price of that property. When purchasing a home in Canada, you will also have to pay a variety of additional fees and taxes, including the following:

  • The non-resident speculation tax, if applicable
  • Property transfer tax (at both the provincial and municipal levels)
  • Special taxes on new builds
  • Sales tax on mortgage insurance
  • Any applicable interest fees

Conclusion

In this blog, we understand how locals and foreigners can buy property in Canada. owning a property that stabilizes or improves your financial status. In Canada, a down payment of at least 5% of the home’s purchase price is required when acquiring real estate. 20% is the required minimum down payment for homes costing $1 million or more. Most employers will automatically deposit your paycheck into your savings or bank account. The Canadian government offers provincial and territorial tax credit alternatives to buyers.

Real estate is taxed in Canada just like other assets. The same land transfer tax is imposed on both domestic and foreign buyers. You can purchase a house in Canada as a foreigner. So when are you going to buy your property, huh?

Salman Rundhawa
Salman Rundhawa
Salman Rundhawa is the founder of Filing Taxes. Salman provides valuable tax planning, accounting, and income tax preparation services in Toronto, Mississauga, Oakville, and Hamilton.

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