Buying property in Canada as an American – is it hard?

Buying property in Canada has become significantly more complicated for foreigners in recent years. In an effort to address housing affordability for locals, the Canadian government has implemented strict measures targeting foreign buyers.

So, is it possible for an American to buy property in Canada right now? The short answer is yes – but with major geographical restrictions and potentially higher costs than you might expect.

Use Wise to save money on your property purchase

Buying a property abroad is a big step and involves important financial decisions. Wise, an international money transfer company, provides specialist support to help you navigate large international transfers and save on exchange fees. Fill out Wise’s online form today to find out how they can assist you.

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Can Americans buy property in Canada?

Yes, Americans can buy property in Canada, but your options are currently limited by the Prohibition on the Purchase of Residential Property by Non-Canadians Act.

Originally introduced in 2023, this ban prevents foreign nationals (including US citizens) from buying residential property in specific areas. In February 2024, the Canadian government announced an extension of this ban until January 1, 2027.

However, this is not a blanket ban on the entire country. You can still buy property if:

• The property is located outside a Census Metropolitan Area (CMA) or Census Agglomeration (CA): The ban focuses on major cities and population centers. Recreational properties, cottages, and homes in many rural areas are generally exempt.
• You hold a valid Work Permit: Temporary residents with a valid work permit (valid for at least 183 days at the time of purchase) may be exempt, provided they have not purchased more than one residential property.
• You are a spouse or common-law partner of a Canadian: If you purchase the property with a spouse or partner who is a Canadian citizen, permanent resident, or person registered under the Indian Act, the ban does not apply.

Note: If you buy a property in violation of the Act, you could face a fine of up to CAD 10,000, and the government may order the sale of the property.

If you find a property you are eligible to buy, you will need a cost-effective way to send your down payment and closing costs to Canada. That’s where Wise comes in.

You can use Wise to move money abroad for a property purchase – it uses the mid-market exchange rate and transparent fees, which can be cheaper than traditional bank transfers.

What buying property gets you

• A vacation home or investment: You gain a foothold in a stable real estate market and a place to stay in beautiful locations like the Muskoka lakes or the BC interior.
• Rental income: If you buy in an eligible area, you can rent out the property to long-term tenants or vacationers (subject to local bylaws).
• Asset diversification: Owning real estate in a different currency (CAD) can diversify your investment portfolio.

What buying property does not get you

Many Americans hope that owning a home in Canada will smooth the path to immigration.

• Residency or Visas: Owning property in Canada does not give you any right to residency, a visa, or citizenship. You will still be subject to standard visitor rules (usually allowing a stay of up to 6 months at a time).
• Immigration Points: Property ownership generally does not increase your points score for skilled worker immigration programs like Express Entry.

How difficult is the process?

For an eligible property, the buying process is relatively straightforward and similar to the US system, though with different terminology.

1. Find a Realtor: Essential for navigating the local market and checking if a specific property falls under the foreign buyer ban.
2. Hire a Lawyer: Unlike some US states that use escrow companies, Canadian real estate transactions are handled by lawyers or notaries.
3. Make an Offer: Your realtor drafts the Agreement of Purchase and Sale.
4. Due Diligence: Home inspections and financing approval.
5. Closing: Your lawyer transfers the funds and registers the title.

Common Forms:

• FINTRAC Forms: You will need to provide a government-issued ID to satisfy Canadian anti-money laundering laws.
• Land Transfer Tax Affidavits: Documents confirming your residency status and eligibility for the property transfer.

Typical timelines

The process from offer to closing typically takes between 60 to 90 days. However, obtaining financing as a non-resident can sometimes extend this timeline, so it is wise to start the mortgage pre-approval process early.

Transferring money to Canada for the purchase

You will need to transfer a significant amount of USD to CAD for your deposit and final purchase price. Banks often add a markup to the exchange rate, which can cost you thousands on a large transfer.

You can use Wise to move money between your US and Canadian bank accounts, or pay the seller’s lawyer directly if they accept third-party transfers.

Wise uses the mid-market exchange rate – the one you see on Google – without the hidden markups often charged by banks. Wise’s fees are low and transparent; you always know what you’re being charged.

What are the tax implications?

You should budget for substantial taxes when buying north of the border.

In Canada

• Non-Resident Speculation Tax (NRST):
  • Ontario: A 25% tax applies to foreign nationals buying residential property anywhere in the province.
  • British Columbia: A 20% Additional Property Transfer Tax applies in specified regions (like Metro Vancouver, Fraser Valley, and Nanaimo).
• Land Transfer Tax: Most provinces charge a land transfer tax based on the purchase price (rates vary from 0.5% to 2.5% typically). Toronto has an additional municipal land transfer tax.
• Underused Housing Tax (UHT): This is a federal 1% annual tax on the value of vacant or underused housing owned by non-Canadians. As a foreign owner, you must file a UHT return annually, even if you qualify for an exemption.
• Property Taxes: Annual municipal taxes based on the assessed value of your home.

In the USA

• Reporting: You generally do not pay US tax on the purchase itself, but you must report foreign assets if their value exceeds certain thresholds (Form 8938) or if you hold foreign bank accounts (FBAR).
• Capital Gains: When you sell the property, you may owe capital gains tax in both Canada and the US. The US-Canada tax treaty helps avoid double taxation, but you will need a cross-border tax specialist.

Taxes

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Local laws and regional variations

The most critical variation right now is where the Foreign Buyer Ban applies.

• Ban Zones: The ban applies to Census Metropolitan Areas (CMAs) (population 100,000+) and Census Agglomerations (CAs) (core population 10,000+).
  • Example: You generally cannot buy in Toronto, Vancouver, Montreal, or Ottawa.
  • Example: You might be able to buy in rural Muskoka, parts of Whistler (check specific boundaries), or smaller coastal towns in the Maritimes.
• Provincial Taxes: Even if the federal ban permits a purchase in a rural area, provincial taxes like Ontario’s 25% NRST still apply to foreign buyers.

Renting out your property: is it allowed?

Yes, foreign nationals can be landlords in Canada, but the tax rules are strict.

• Withholding Tax: The Canada Revenue Agency (CRA) requires that 25% of the gross rental income be withheld and remitted to the CRA each month.
• Section 216 Election: You can elect to pay tax on your net rental income (profit after expenses) rather than the gross amount. To do this, you must file Form NR6 (Undertaking to File an Income Tax Return by a Non-Resident Receiving Rent) and then file a Canadian tax return annually.
• Short-term Rentals: Many municipalities (e.g., Vancouver, Toronto) have strict bylaws restricting short-term rentals (Airbnb) to principal residences, which effectively bans non-residents from operating them in those cities.

Buying land in Canada

The rules for buying vacant land have been relaxed. Following amendments to the foreign buyer ban regulations in March 2023, the prohibition no longer applies to vacant land zoned for residential or mixed use.

This means Americans can generally purchase a plot of land for development, provided the purchase doesn’t violate other provincial restrictions.

Getting a mortgage: should I get one in Canada or the USA?

Do lenders in the USA offer mortgages for overseas purchases?

Generally, no. US banks typically will not grant a mortgage for a property located in a foreign country because they cannot easily foreclose on it if you default.

What about banks in Canada?

You will likely need a Canadian mortgage.

• Down Payment: Non-residents are usually required to put down a higher down payment than residents – typically 35%.
• Credit History: Canadian lenders can often access your US credit report, but they may ask for additional proof of income and assets.
• Presence: You may need to visit Canada in person to sign closing documents at a lawyer’s office.

Banking

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The verdict: should you buy a house in Canada as an American?

Pros

• Stable Market: Canada historically has a robust real estate market.
• Lifestyle: Access to world-class nature, skiing, and safe communities.
• Currency: If the US dollar is strong against the Canadian dollar, your purchasing power increases.

Cons

• The Ban: You are currently restricted to rural or recreational areas until at least 2027.
• High Taxes: Non-resident taxes in Ontario (25%) and BC (20%) can drastically increase the purchase price.
• Underused Housing Tax: An added annual paperwork burden and potential 1% tax if the home sits empty.
• Financing: High down payment requirements (35%).

Useful resources

Canada Mortgage and Housing Corporation (CMHC) – Official details on the Foreign Buyer Ban.

Government of British Columbia – Information on BC Speculation and Vacancy Tax.

Government of Ontario – Details on the Non-Resident Speculation Tax.

Government of Canada – Underused Housing Tax – Guide to the 1% vacant home tax.

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