Buying a property in Toronto: Mortgage financing information for non-residents

Properties in Toronto are popular investments. Ontario has no restrictions on foreign ownership of real estate. Once you have decided to purchase in Toronto, a common question is - how do I get financing - in other words, a mortgage?

The requirements for non-residents are a bit different than for Canadian residents. But before we go into the qualifications, what is the definition of a non-resident?

It's simple. If you stay in Canada less than 6 months a year, the government considers you a non-resident. (Don't worry, you can still open a bank account and buy property). If you live in Canada for more than 6 months a year, you are a resident. To become a resident you must apply for landed immigrant status.

Your mortgage must be arranged by a Canadian mortgage agent/broker, as foreign banks cannot register mortgages in Canada. You may wish to have someone assist you with translation if you don't happen to be fluent in speaking English.

For non-residents, the major banks prefer a 35% downpayment for common types of properties such as houses and condominium units. Commercial properties such as stores, offices, industrial units and so on require higher downpayments because lenders consider them to be a higher risk.

There are many other lenders, however, besides the major banks. Some of these lenders will accept a 25% downpayment for non-residents. Interest rates from these lenders tend to be somewhat higher. If you have applied for landed immigrant status, currently work in Canada and file Canadian taxes, some lenders will work with a 15% downpayment. Again, higher interest rates may apply to deals with lower downpayments - and depending on the lender, high-ratio mortgage insurance from CMHC or Genworth Capital may apply.

Qualifying for a mortgage simply involves interviews via phone, fax or email to gather personal information such as assets and liabilities, employment and income information. You'll need to provide documentation for income verification, tax returns, credit bureau or bank's report (letter from borrower's own bank stating that all accounts are in good standing to date), down payment confirmation via bank statements, copy of 2 pieces of identification, and a real estate appraisal.

Each person's application is considered on a case-by-case basis. Depending on your specific qualifications in the above areas, the interest rate and terms you may be offered will vary.

Your mortgage approval usually takes approximately 48 hours after your application and documentation have been submitted to the lender.

To complete the transaction, a Canadian lawyer will prepare the mortgage documents and arrange property registration at the Land Titles office. Documents can be sent to you by courier outside Canada for signing - this will need to be arranged with the lawyer and lender well in advance of the closing date.

Other Costs when Buying Property

There are other costs and fees when you buy property. For example, you will want to have the property inspected by a qualified home inspector to check for structural defects and review the physical condition of the property. Inspection fees range from $250-$450.

Your lender may require a property appraisal to verify the value of the property. The cost is usually around $250.

A lawyer is required to review the Offer to Purchase, search the title, draw up mortgage documents and tend to the closing details. The fee will be approximately $600-$800, plus disbursements (various costs the lawyer incurs) which they will also require you to cover.

The government charges Land Transfer Tax on a sliding scale based on the property value. This must be paid at closing, - the day that you actually purchase the property. There are land transfer tax calculators available online to help you determine how much tax will apply.

If you are buying a newly constructed home, Federal Goods and Services Tax (GST) of 6% will be charged. It is often included in the quoted sales price. GST does not apply to resale housing unless the home has been very substantially renovated, in which case it may be treated as if it were a new home.