INVESTING AS A FOREIGNER OR A CANADIAN LIVING ABROAD

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2 INVESTING AS A FOREIGNER OR A CANADIAN LIVING ABROAD

3 A Message to You from Geoff Lee, President of GLM Mortgage Group With the lowering of interest rates in Canada and the devaluing of the Canadian dollar, foreign investors have Canada on their radar! Whether you want to buy a condo in Vancouver or a cottage near Toronto, Canada presently has opportunities for investment that have never been so attractive to the Investor. At GLM Mortgage Group, we have the know how in foreign investment and the channels necessary to access a streamlined process in getting an investment property purchase done. Our experience makes sure that you don t hit unnecessary pitfalls that could create a negative experience. Call us today and we ll walk you through the process. Foreign purchase is not as overwhelming as it might seem. If you are a Foreigner or a Canadian living abroad, let us walk with you through your Canadian property purchase. Geoff Lee geoff@glmmortgage.com

4 Table of Contents A Message to You From Geoff Lee... 3 Table of Contents... 4 Foreign Ownership and Requirements for Financing... 5 Requirements for Property... 6 Requirements for Closing... 7 The NEED TO KNOWs... 8 The 15% Property Transfer Tax on Residential Property Transfers to Foreign Entities in the GVR... 9 The Vacancy Tax 10 Conclusion... 10

5 FOREIGN OWNERSHIP What does foreign ownership mean? Just because you are a Canadian citizen living abroad doesn t mean that you are exempt from the rules for foreigners buying real estate in Canada. Foreign ownership applies if: You don t reside in Canada for more than 6 months a year (even if you are Canadian) You don t report your working income to CRA REQUIREMENTS FOR FINANCING EMPLOYMENT o If you are Business for Self (BFS) Need to be in business for a minimum of 2 years Need to verify 2 years of BFS through something like yearly financials Need to show current year s financial history Current personal financial history Current company financial history (if applicable) o If you are Employed by someone else not BFS Need to show a letter of employment Need to show latest paystub The lender may or may not request employment verification

6 DOWN PAYMENT o Typically 35% down o 25% down on exception Exceptions include: Being a Canadian citizen living abroad US citizen o Down Payment can be gifted (from an immediate family member which means mother, father, sister, brother, etc). o The money for down payment and closing costs need to be on Canadian soil 30 days prior to the completion date. Exception of 15 days depending on the lender and circumstances. o Lender may require a deposit of 12 months principle and interest payments in a Canadian account o Need a Canadian bank account FINANCIAL PROFILE o The lender may or may not want to see an international Credit Bureau to view credit history o The lender may or may not want to see a Bank Reference letter o All current debts need to be included in the application. REQUIREMENTS FOR PROPERTY PROPERTY o Type of property: Can be owner occupied Can be a second home Can be an investment property RATES o Rates will be the best discounted rates

7 LENGTH OF LOAN o Term Length of contract will be up to 10 years long. At the end of 10 years, the loan will have to be renewed. o Amortization This is the length of the loan over its lifetime. The contract term of the loan is typically shorter than the length of the amortization of the loan. Typically, amortization is over 25 years Amortization can be over 35 years on exception Exceptions include: o Being a Canadian citizen living abroad o US citizen REQUIREMENTS FOR CLOSING What are the closing costs? PURCHASE PRICE PROPERTY TRANSFER TAX (PPT) In British Columbia, PPT is paid by the buyer at 1% of the first $200,000 CDN of the purchase price AND 2% of the remaining balance of the purchase price. This is also known as Land Transfer Tax. Each Canadian province has its own rules regarding Property Transfer Tax. BANK APPRAISAL FEE HOUSE INSPECTION FEE PROPERTY INSURANCE COST LEGAL FEES BROKER FEES (may or may not be applicable) TAX IMPLICATION contact your tax accountant to understand what tax implications will affect you. o Canada Revenue Agency (CRA) will have tax implications when you sell your property. Contact your tax accountant about CRA rules for selling a Canadian property.

8 THE NEED TO KNOW s You will need to show an out of Canada permanent resident address You will need to use a Canadian Solicitor/Lawyer o Be sure the Solicitor/Lawyer you use is familiar with foreign investors You can make an offer on a property without physically being in Canada o Be sure to use a Realtor familiar with foreign investment purchase. Some lenders will require your physical presence to be in Canada to complete the purchase transaction Some lenders will allow you to remain in your country and use a Canadian solicitor to complete the purchase transaction while facilitating with your Solicitor/Lawyer from abroad. You will need to have the ability to transfer monies from your Canadian bank account to the TRUST account set up by your Canadian Solicitor/Lawyer s firm. How long does it take? The purchasing process is the same across all Canadian provinces. If the property is vacant, it could close in as little as 30 days.

9 ADDITIONAL PROPERTY TRANSFER TAX ON RESIDENTIAL PROPERTY TRANSFERS TO FOREIGN ENTITIES As of August 2, 2016, the Ministry of Finance of British Columbia has applied an additional 15% property transfer tax to certain BC residential property purchases to anyone who is a foreigner (or foreign entity such as a corporation). a. This is applied only to the Greater Vancouver Regional District please contact GLM Mortgage Group for an exhaustive list of the areas affected. b. This affects anyone who are foreign nationals including foreign corporations or taxable trustees. i. Please note that the corporation can be incorporated in Canada. However, if the corporation is controlled in whole or in part by a foreign national or other foreign corporation the tax applies. c. The additional tax applies in addition to the general property transfer tax. d. The additional tax does not apply to non-resident property (commercial properties). e. The additional tax will be paid with at the statement of adjustments when signing at the lawyer s office. f. There are heavy fines associated with avoidance of this tax (ie purchasing a property through a Canadian relative who holds the property in trust) and can even result to up to two years in prison.

10 What are the INS and OUTS of the new Vacancy Tax for Foreign Entities? The Vacancy Tax is a new initiative the BC Government is rolling out over the next several months. This tax applies to homes that are not occupied by a tenant for at least 180 days during the year. a. The tax amount is a 1% increase in property taxes. b. The 1% increase can add up quickly contributing to additional costs to consider if your property is not occupied for the minimum 180 days. c. This comes into full effect as of July 1, 2017 meaning that all empty properties must be occupied before that date to be exempt. CONCLUSION: Canada is one of the top destinations in the world for those who want to move to another country. Around 250,000 applications for immigration are accepted yearly. As a hotspot for foreign investment due to a weaker Canadian dollar and fantastic interest rates, Canada remains an attractive to the foreign investor who is looking for a great investment property. In Canada, lenders are open to foreign investment and make the transaction a relatively streamlined process. Copyright 2015 GLM Mortgage Group All Rights Reserved. No part of this special report may be reproduced in any form or by any electronic or mechanical means including information storage and retrieval systems, without permission in writing from the author. The only exception is by a reviewer, who may quote short excerpts in a review.