When on the hunt for a second home for investment, to holiday, or to retire to, many people in the U.S. look for cheap homes in exotic locations. Costa Rica, Italy, Mexico, or France are popular locations. But one place that is often overlooked for cheap homes is Canada. Why Canada? Well, there are a lot of reasons.
What some house hunters do not realize is that Canada shares many of the same aspects as Europe. From the French language to architecture to culture, there are a lot of similarities. Since the country sits right next to the U.S., it is just a little hop over the border. Our own economy even has a lot of influence.
The one thing you need to realize is that Canada’s property market is very well established. Market values differ according to location, depending on city or province. The housing market is currently inexpensive (generally speaking. Some locations are pricey) and there are some great spots for a second home. If you are into investing, owning a home in Canada can be profitable if you understand the Canadian tax laws that apply to real estate investments. Here are some reasons to buy a cheap home in Canada.
Why Buy Cheap Homes In Canada
Another good reason to buy a cheap home in Canada is there is no residency or citizenship requirement for buying property in Canada. Immigrants can temporarily occupy a Canadian residence but if you want to live there for an extended period, you will need to comply with Canada’s immigration requirements. The same applies if you want to be a permanent resident.
Non-residents can own property in Canada, even for investment reasons. If the home is a rental property, though, you will need to file annual tax returns with the Canada Revenue Agency (CRA).
Where To Buy Homes in Canada
Canada has no shortage of locations to buy cheap homes. When shopping for lower-priced housing that meets your budget, you always want to apply the same principles, no matter where you look. Compare prices, check out the surrounding neighborhood, think about what type of neighborhood the house is in, and the house’s condition.
When checking out locations in Canada, there is a wide variety of landscapes to choose from. There is the coast, mountains, secluded woods, sprawling cities, and suburbs. The coast is a great place for anyone who is looking for a vacation home and you can choose from either the Atlantic or Pacific coast. The mountain provinces like Alberta are full of energy-related jobs. If you like winters, the northern provinces like Saskatchewan are ideal.
All of these areas will have bargain deals for housing. Unless you have traveled the country extensively, you will need to study a map. Do some research online and plan a trip to check out some of the locations.
Currently, if you are looking for a really good bargain, Nova Scotia and Saskatoon are currently some of the lowest in real estate prices. Nova Scotia has low property prices throughout most of the province. While it is often overlooked as a spot to buy a home but has a lot to offer. It is located on Canada’s south-eastern shores and shares the same latitude as Bordeaux in France (which has some of the highest real estate prices in France). The summers in Nova Scotia are very pleasant. The waters from both the ocean and the lake are warm in the summertime and the region has a very low cost of living.
Saskatoon is located in central Saskatchewan and is considered the province’s largest city. It has a population of more than 200,000 and its architecture is very similar to Paris. It has beautiful bridges and is commonly referred to as the Paris of the Prairies. Like Nova Scotia, Saskatoon is often overlooked by investors and second-home buyers.
Home Equity Loans
Applying for a mortgage loan for a home in Canada is much the same as applying in the U.S. Canada’s banking industry is dominated by five leading banks and is heavily regulated by the government. The leading banks are CIBC, Scotiabank, Royal Bank of Canada, TD Canada Trust, or Bank of Montreal. U.S. citizens buying Canadian property are eligible for several programs. You can contact a local Canadian real estate agent to find out details.
Credit is much harder to get in Canada than the U.S. You have to have proof that you can afford the home you are buying or you will not qualify for the loan. When buying a home in Canada, banks usually require a down payment of at least 35 percent of the home’s market value. The loan is also amortized over 25 years.
Canada Property Taxes
The important thing to remember when buying a home in Canada is the taxes. You have to pay a provincial transfer taxthat varies from province to province. The tax can be anywhere from 1% on the first $200,000 and 2% on the balance. Municipalities in Canada also have an annual property tax which is based on the home’s assessed value. This includes school and other taxes.
If this is a home buyer’s first property, they might qualify for some tax exemptions. New home purchases are subject to the federal Goods and Services Tax (GST) but homes that are resales do not qualify. The good news is if you plan on living in the home, you might be able to get a partial rebate.
In Canada, the interest on new homes is not tax deductible. Plus, the income tax rate is higher in Canada than in the U.S. If you are looking to buy rental property, The Canadian Income Tax Act requires that 25% of the gross income from rentals is remitted each year. You can reclaim some previous taxes if the property has a net loss.
You can also get annual deduction for property taxes, mortgages, bank loans, or a line of credit if the property is an investment property.