International Students: Buying Canadian Real Estate

Canada is a popular destination for international students due to its high-quality education system, vibrant multicultural cities, and excellent living standards. Many international students may consider buying property in Canada, either as an investment or to secure stable accommodation. While international students can legally purchase property in Canada, there are important factors to consider, including legal requirements, financing options, and potential tax implications. This paragraph will explore the key considerations for international students looking to buy a house in Canada.

International students can buy property in Canada, but there are regulations and conditions

International students who meet certain requirements can purchase property in Canada. These requirements include having spent at least 244 days in Canada for a minimum of three to five years preceding the year of purchase, having filed income tax returns for each of those years, being enrolled in a program of authorized study at a designated learning institution, and purchasing a property for a price not exceeding $500,000. These conditions make it challenging for most international students to qualify for property purchase.

To obtain a mortgage loan to finance their home purchases, international students must demonstrate their eligibility and provide updated paperwork. Local banking institutions in Canada offer mortgage alternatives for foreign students, but they may apply more stringent requirements. It is important to note that the average purchase price of a home in urban areas like Ontario and British Columbia exceeds $500,000, making it difficult to find suitable properties within the price limit.

Additionally, international students should be aware of other costs associated with homeownership, such as insurance and repair expenses. They may also need to pay extra taxes, such as the Non-Resident Speculation Tax (NRST) and empty homes tax if they decide to work or travel outside of Canada. Understanding the local housing markets, real estate laws, and tax implications is crucial before making any property purchases in Canada.

Non-Canadians are prohibited from purchasing residential property within urban areas

As of January 1, 2023, non-residents are banned from buying residential property in Canada for two years. This ban, called the Prohibition on the Purchase of Residential Property by Non-Canadians Act, is an attempt to combat rising housing costs and will last until 2027. The Act prohibits non-Canadians from purchasing residential property within urban areas of Canada. However, there are several exceptions to this rule.

International students are considered non-Canadians when it comes to buying residential property in Canada, even if they have temporary status. However, they can still purchase a home if they meet certain requirements. These include having a study permit, being enrolled in a program of authorised study at a designated learning institution, having filed income tax returns for each of the five taxation years, having been physically present in Canada for a minimum of 244 days in each of those years, and purchasing a property for a price not exceeding $500,000.

In addition, international students who have lived in Canada for extended periods and are working towards permanent residency may be allowed to purchase homes. It is up to these individuals to prove that they meet the requirements regarding the length of time spent in Canada. Local banks in Canada offer mortgage alternatives for foreign students to purchase a home, but they will apply stringent requirements.

It is important to note that the ban does not include homes outside of census metropolitan areas (cities with populations higher than 100,000) or properties like recreational properties, vacation homes, and cottages. There are also exceptions for foreign workers and foreign students who are temporary residents and meet specific conditions, such as holding a valid work permit, being physically present in Canada for at least 244 days in the preceding five years, filing income tax returns, and demonstrating the intention to become permanent residents and settle in Canada.

International students can obtain mortgages from local banks

International students in Canada can obtain mortgages from local banks to purchase property. While it may seem like a daunting process, it is entirely possible for international students to become homeowners in Canada.

Firstly, it is important to note that international students are not prohibited from purchasing property in Canada. There is no residency or citizenship requirement for buying property in the country. This means that international students are free to buy real estate, as long as they meet the necessary criteria.

Local banks in Canada offer mortgage alternatives for foreign students. However, the requirements for obtaining a mortgage as a foreign student can be stringent. Some banks may require a down payment of at least 35% and proof of international credit history. Additionally, students might need to demonstrate a healthy debt-to-income ratio and sufficient income to cover the mortgage.

International students with certain visa types, such as an F1 visa, may be able to borrow up to 90% of the purchase price. It is beneficial to have a reliable credit history and some form of income verification, such as tax returns. If an international student does not have an established credit history, they may still be able to obtain a loan with a co-signer. This could be a Canadian citizen or a relative/friend residing in Canada.

It is recommended that international students consult with their educational institution's international office to explore their financing options. Understanding the local housing market and real estate laws is also crucial before making any decisions.

Students must meet eligibility requirements and update their paperwork

International students in Canada are generally considered non-Canadian and are subject to the country's restrictions on foreign property ownership. However, they can still buy a house in Canada by meeting specific eligibility requirements and keeping their paperwork up to date.

Firstly, international students must understand the local housing market and real estate laws. They should be aware of any Indian Act restrictions or special rules for foreign investors, as these can vary depending on the location and ownership history of the land.

Secondly, international students must ensure they have the necessary permits and meet the eligibility criteria. A study permit is essential for staying in the country while studying full-time, while a work permit is required for working and saving up to buy a house. Obtaining a work permit typically involves demonstrating an intention to settle in Canada permanently. International students should also be prepared to provide proof of their student status, income tax returns, and physical presence in Canada for a minimum number of days each year.

Additionally, international students should consider their financing options and budget constraints. They may need to provide down payments, secure mortgages, or utilise student loan debt to purchase a home. It is worth noting that the Canadian government has set a maximum purchase price of $500,000 for certain eligible buyers, including international students. This limit may not be sufficient for buying a home in major cities or provinces with higher housing costs, such as Ontario or British Columbia.

Lastly, international students should stay informed about any updates or changes to the regulations. The Canadian government has introduced temporary bans and exemptions for foreign buyers, which can impact the eligibility of international students. It is crucial for students to consult official sources and seek professional guidance to ensure they comply with the latest requirements and have the necessary documentation before purchasing a property.

International students may need to pay extra tax, such as the Non-Resident Speculation Tax

International students in Canada are generally considered non-residents for tax purposes. This means that they are subject to additional taxes, such as the Non-Resident Speculation Tax (NRST), when purchasing property. The NRST is a tax imposed by the Government of Canada on foreign entities or individuals who are not Canadian citizens or permanent residents and who purchase or acquire an interest in residential property in certain provinces. The NRST rate is currently 25% and is applied to the value of the property.

The NRST specifically targets foreign investors or speculators who buy homes in Canada without intending to live in them, which has contributed to rising housing costs. By imposing this additional tax, the government aims to deter non-resident buyers from entering the housing market and curb rapid price inflation. As an international student, understanding your tax liabilities and how they impact your investment strategy is crucial.

To determine your tax obligations as an international student, you must establish your residency status. If you have established significant residential ties to Canada, you may be considered a resident for income tax purposes. Factors that determine residential ties include the duration of your stay, periodic returns to your home country, and whether you intend to permanently reside and settle in Canada. If deemed a non-resident, you will be subject to the tax rules that apply to non-residents, including the NRST.

To mitigate the burden of the NRST, international students can consider joint ventures or ownership with Canadian residents. Partnering with a Canadian resident can reduce the tax burden and provide insights into local market dynamics, enhancing investment potential. Additionally, consulting with a tax advisor or property advisor familiar with the specific regulations in the province of interest is essential. They can guide you through potential exemptions, rebates, and deductions related to your foreign property investments.

It is important to stay informed about changes in legislation and tax laws, as they can directly impact the costs associated with your property purchase. By being proactive and educating yourself about the current tax regulations, you can make informed decisions that align with your financial goals and navigate the complexities of the Canadian housing market effectively.

Frequently asked questions