International Students: Buying Canadian Real Estate

Canada is a popular destination for international students due to its high-quality education, diverse cities, and excellent living standards. Many students may consider buying property for investment or stable accommodation. While international students can legally purchase property in Canada, there are financial, legal, and tax considerations. As of 2023, the Canadian government has restricted foreign nationals from buying residential property, but there are exceptions, and the law does not apply to all areas. International students must meet eligibility requirements, including a larger down payment, and may need to explore financing options.

International students' eligibility to buy a house in Canada

International students can buy property in Canada, but there are several eligibility requirements and financial, legal, and tax considerations to keep in mind.

Firstly, it is important to note that the Canadian government introduced the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which is in effect from January 1, 2023, to January 1, 2027. This Act bans non-Canadians, including foreign investors, from purchasing residential real estate in census metropolitan areas like Vancouver, Toronto, and Montreal for a period of two years. However, there are exceptions to this ban, and international students may still be able to purchase a home if they meet certain criteria.

To be eligible to buy a house in Canada, international students must have a valid study permit, which allows them to stay in the country while studying full-time. Additionally, they may need a work permit if they plan to work and save for the house. International students should also be prepared to navigate lender regulations and requirements, as the process can be complex and daunting. Obtaining a mortgage as an international student can be challenging due to the lack of a Canadian credit history, and they may be required to make a larger down payment, typically at least 35% of the purchase price.

There are additional costs and taxes to consider, such as closing costs, which can include legal fees, land transfer taxes, and title insurance. In some provinces like British Columbia and Ontario, there is also a Foreign Buyers Tax of 20% on top of the property's purchase price. International students who meet certain conditions, such as being enrolled in a recognized Canadian school, may be exempt from this additional tax. Additionally, if students plan to rent out their property, any rental income will be subject to Canadian taxes, and they will need to file a tax return.

Overall, while it is possible for international students to buy a house in Canada, it is important to carefully consider the eligibility requirements, financial responsibilities, and potential challenges before making a purchase.

Temporary residency and homeownership

International students in Canada are classified as non-residents, and there are several regulations and conditions they must meet to purchase a house. While it is possible for international students to buy property in Canada, it can be a complex process.

Firstly, international students must understand the eligibility requirements and ensure their paperwork is in order. A study permit allows students to stay in the country while studying full-time, and a work permit enables them to work and save for a house. It is important to note that international students are subject to specific regulations, such as the requirement to demonstrate their intention to become permanent residents and settle in Canada. Additionally, they must not have purchased another residential property during the prohibition period.

Secondly, the purchase price of the residential property plays a crucial role. The maximum purchase price without triggering additional taxes is $500,000. However, in popular provinces like Ontario and British Columbia, the average house price exceeds $800,000, making it challenging to find properties within the $500,000 limit. International students should be aware of potential additional costs, such as the Non-Resident Speculation Tax (NRST), which can significantly increase the total cost of purchasing a home.

Lastly, international students should consider their future plans and the potential implications of owning a home in Canada. There may be extra taxes, such as the empty homes tax, if they decide to work or travel back to their home country. Buying a house as a non-resident involves complex considerations, and it is recommended to seek guidance to navigate the process successfully.

Additional costs and taxes for international students

International students can buy property in Canada, but they must be aware of the additional costs and taxes involved. Here are some of the key considerations for international students looking to purchase real estate in Canada:

Foreign Buyers Tax

In certain parts of Canada, such as British Columbia and Ontario, there is an additional tax called the Foreign Buyers Tax, which is 20% on top of the property's purchase price. However, international students who meet specific criteria, such as being enrolled in a recognised Canadian school, may be exempt from this tax.

Income Taxes on Rental Properties

If an international student plans to rent out their property while studying, any rental income earned will be subject to Canadian taxes. A tax return must be filed for this income.

Closing Costs

In addition to the down payment, buyers typically pay between 1.5% and 4% of the home's purchase price in closing costs. These costs can include legal fees, land transfer taxes, and title insurance.

Residency Status and Income Tax Returns

International students must determine their residency status, as this impacts their income tax return filing requirements. If an international student has established significant residential ties with Canada, they are considered a resident for income tax purposes. Factors that determine residential ties include the length of stay in Canada, periodic returns to their home country, and moves to another country when not attending university.

Other Considerations

It is important to note that the maximum purchase price of $500,000 mentioned in some sources may not be sufficient to buy a home in major cities or provinces like Ontario or British Columbia, where average house prices exceed $800,000. Additionally, regulations and conditions, such as those outlined in the Prohibition on the Purchase of Residential Property by Non-Canadians Act, may apply to foreign buyers.

The home-buying process for international students

International students can buy property in Canada, but there are several eligibility requirements and regulations to be aware of. Here is a step-by-step guide to the home-buying process for international students in Canada:

Step 1: Understand the Eligibility Requirements

International students are considered non-Canadian when it comes to buying property in Canada, even if they have temporary resident status. To be eligible to buy a home, international students typically need to demonstrate their intention to become permanent residents and settle permanently in Canada. This usually involves meeting certain requirements, such as having spent a significant portion of the previous years in the country.

Step 2: Research the Local Housing Market and Regulations

Before beginning your home search, it is essential to research the local housing market in your desired area. Prices vary significantly across Canada, with average home prices in some major cities and provinces exceeding $500,000 or $800,000. Understanding the real estate laws and any additional taxes that may apply to international students, such as the Non-Resident Speculation Tax (NRST), is crucial.

Step 3: Obtain the Necessary Permits and Documents

As an international student, you will need a valid study permit to remain in Canada while studying full-time. If you plan to work and save for a house, you will also need a work permit. Ensure that you have all the required documents, such as income tax returns, before initiating the home-buying process.

Step 4: Explore Financing Options

Understand the financing options available to international students, as you may need a mortgage to purchase a home. Be prepared for the additional costs and considerations that come with buying a home in a foreign country, such as potential extra taxes if you decide to work or travel back to your home country.

Step 5: Begin Your Home Search and Due Diligence

With your financing in place and a clear understanding of the market, you can start searching for your dream home in Canada. Research properties, compare prices, and consider seeking professional guidance to ensure a smooth transaction.

Step 6: Make an Offer and Finalize the Purchase

Once you've found the right property, make an offer and proceed with the necessary contracts and paperwork. Having a real estate lawyer review all documents before signing is advisable.

Remember that the home-buying process can be complex, and it is always recommended to seek independent legal and financial advice to ensure you understand your rights and obligations as an international student purchasing property in Canada.

How to prepare for buying a house in Canada as an international student

As an international student in Canada, you can buy a house, but there are several eligibility requirements and regulations you must meet and understand. Here is a guide on how to prepare for buying a house in Canada as an international student:

Understand the Regulations and Requirements

Firstly, familiarize yourself with the relevant laws and regulations. For instance, the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which targets foreign investors who buy homes without living in them, will be in effect until 2027. This Act specifies that non-Canadians cannot buy residential property in Canada for a period of two years. However, there are exceptions for international students who meet certain requirements. These include being enrolled in an authorized study program at a designated learning institution, having filed income tax returns for each of the preceding five taxation years, and having been physically present in Canada for a minimum of 244 days in each of the preceding five calendar years.

Research Local Housing Markets and Real Estate Laws

Gain a comprehensive understanding of the local housing markets and real estate laws in the specific province or city you plan to purchase property in. This will help you make informed decisions and identify areas that may be more affordable or have lower taxes. For example, the average house price in Ontario or British Columbia exceeds $800,000, making it challenging to find properties within the $500,000 maximum purchase price limit for non-citizens. Additionally, some areas, such as Vancouver, have a Non-Resident Speculation Tax (NRST), which can significantly increase the total cost of purchasing a home.

Obtain the Necessary Permits and Documents

Ensure you have the necessary permits and documents in order. A study permit will allow you to stay in the country while studying full-time, and a work permit will enable you to work and save money for your future home purchase. Keep in mind that some banks may have stringent requirements for providing mortgage loans to international students. Additionally, if you are over 21 years old, you may need to provide a larger down payment, typically around 25% to 35% of the property value.

Consider the Financial Implications

Be aware of the financial implications and potential risks associated with buying a home as an international student. In addition to the purchase price, there may be extra costs such as insurance, repair expenses, and taxes. For example, if you decide to work or travel back to your home country, you may be subject to an empty homes tax. Additionally, if you obtain a mortgage and default on your payments, the bank can auction your property to recoup their investment.

Seek Professional Guidance

Consult with a reputable realtor or legal professional who has experience assisting international students in purchasing property in Canada. They can provide personalized advice, help you navigate the complex process, and ensure that you meet all the necessary requirements and understand the contractual obligations before signing any agreements.

Frequently asked questions