Are you looking to purchase property in Squamish as a non-resident buyer? Here in Squamish we have many people from around the world buying property. Not only does Squamish present excellent investment value, it is also a wonderful place to live and raise a family. There is a growing number of American, UK, Chinese, Australian and other nationalities choosing Squamish as a place to live and invest. There are no restrictions on foreign buyers coming to Squamish, making it an attractive and easy place to move in Canada. If you’re not familiar with Squamish, make sure to browse the pages of this website and become acquainted.
But first, what constitutes a non-resident or foreign buyer? If you plan on buying in Squamish, and residing in Canada for less than six months of the year you fall into this classification. Those living in Canada for more than six months a year, need to apply for immigration status, and are considered resident buyers. If you’re considering Squamish as a place to buy property, here is everything you need to know as a non-resident buyer.
The Foreign Buyer Tax Does Not Apply Here
The controversial foreign buyer tax which was implemented in Vancouver in July 2016 does not apply in Squamish. The tax, which imposes a 15 percent property transfer tax on non-resident purchases, affects the entire Metro Vancouver area. Squamish is the closest place north of Vancouver that isn’t affected by the new tax. There is also an Empty Homes Tax which is one percent of a home’s value applicable to vacant investment properties in the Vancouver area (does not apply to Squamish).
A Deposit Of 35 Percent Will Likely Be Required
Non-residents require a greater deposit than resident buyers. US buyers require a minimum of 20 percent down, while other non-resident buyers require a 35 percent deposit. Mortgage brokers and banks are unable to exceed an 80 percent loan-to-value ratio, meaning foreign buyers cannot finance more than 80 percent of the loan amount. For purchases over one million there is a sliding scale determining the required amount for down payment.
Some Stuff Needs To Be Done In Person
Although much of the property transaction can be done remotely, non-resident buyers need to open a Canadian bank account in person, and may also require meeting with a lawyer or notary to sign mortgage documents face-to-face. If visiting Squamish before deciding on purchasing a property, it is advised to open a bank account to avoid the extra trip should you need to do this as part of the home buying process.
A Canadian Lender Must Grant Mortgage
Qualifying for a mortgage is similar to other countries. Buyers must provide documents and information such as assets/ liabilities, tax returns, credit bureau or bank report information, personal information and employment/ income info. Foreign banks are not able to register mortgages in Canada so buyers must use a Canadian mortgage provider.
Karen Garrett from Sea to Sky Mortgages deals with non-resident buyers on a daily basis and has outlined the three types of mortgages available for foreign buyers purchasing in Canada.
Fixed interest mortgages commit a client to a pre-determined interest rate for a set term. This term can be from 6 months to 10+ years (more common is 2-5 years). Once the term of a fix term mortgage commences, penalties apply for those who change payments terms, pay off the mortgage in advance, or switch to another financial institution.
Variable rate mortgages are another option. With variable rate mortgages the interest rate fluctuates with the Canadian Prime Lending Rate. Currently interest rates are quite low, making this a desirable option for many. There is often a penalty for pre-payment of three months’ interest. Those in a variable rate can often switch to a fixed rate at no charge provided a fixed term rate is locked in for three years.
Interest only mortgages are the final option. This is when clients pay only the interest of the loan, not the principle. These rates are only available for Canadian and US Buyers.
An amortization period is the amount of time it will take to pay off a mortgage based on the mortgage payments determined at the outset. Most non-resident buyers are eligible for an amortization period of 25 years. Some US buyers can qualify for an amortization period of 30 years.
Fees and closing costs to consider
As one would suspect, there are fees and borrowing costs that non-resident buyers should expect. As mentioned before, Squamish is exempt from the foreign buyer’s tax, however there are other fees that apply to buyers throughout Canada.
Property Transfer Tax is mandatory for all non-residents and Canadians on properties above $500,000 (partial exemption for property between $475K-$500K). The tax is 1% of the first $200,000, 2% on the remaining up to $2 million, and 3% on anything above that. This tax is additional to your deposit and is collected by the lawyer upon settlement.
Appraisal Fees are collected by the bank and usually are between $275 and $450. Lending institutions appraise properties to ensure the agreed upon price of the home is within market range. This secures the risk of the lender. Financial institutions may also charge a one percent fee on the mortgage.
Legal fees range from $1200 to $2000, obtaining legal services is a requirement when purchasing a property in Canada.
If a survey is required to confirm boundaries of the property the survey fee will cost around $300. Surveys are not necessary for condos or townhomes.
Building inspections often form part of the contract and are important to ensure the buyer is aware of the condition of the property; sometimes they are required in order to obtain a mortgage. A typical building inspections costs approximately $500.
Non-resident buyers need to consider exchange rates and the cost of transferring money abroad. Often payment specialists can be used who secure interest rates for a period of time and can offer low fees for their services.
Moving expenses are something else to consider if you plan on moving into your new property. Whether shipping belongings by sea, road or air there can be considerable costs to move belongings from one place to another.
There Could Be Tax Implications
There are no tax barriers for non-residents wishing to purchase property in Squamish. The only tax implication foreign buyers should be aware of is paying income tax on rental income received. If you are investing in property here in Squamish and are looking to rent it out, you will be required to file a tax return each year.
Those wishing to sell their rental or investment property will be subject to capital gains tax; the current tax rate is applied to 50 percent of the gain. Non-resident sellers are also required to pay an estimate of 25 percent of the gain before the home is sold and require a clearance certificate from the lender in order to sell the property.
Working with a Real Estate Agent
When deciding to purchase property in Squamish you will choose a real estate agent to represent you during the transaction. Here in Canada, real estate agents either represent the buyer or the seller. Once a real estate agent is selected, they will help you find a property that meets your requirements. They can view open homes on your behalf, and schedule viewings of other properties for sale. Here at Move to Squamish we are able to represent non-resident buyers and provide services such as Skype walk-thrus and virtual neighbourhood tours so buyers can get a feel for a property without being present.
Once a property is chosen a real estate agent will negotiate on your behalf getting you the best deal in the current market. A contract of purchase and sale is the document which will be drafted and submitted to the listing Realtor and seller. This can all be done electronically. Often there is negotiation before a final price is decided.
When submitting an offer there will be certain ‘subjects’ that form a part of the contract. These subjects could include, subject to financing, subject to building inspection, subject to acquiring strata documents etc. Your real estate agent will ensure the proper subjects are included in the contract to protect you. Important dates that form the contract include subject removal date (when all subjects must be satisfied), completion date (when the property officially transfers ownership), and possession date (the day you can ‘move in’ or ‘take possession’).
Other documents you will complete with your real estate agent include a FINTRAC form for financial reporting to the Canadian government, and a Working with a Realtor brochure to outline the agent/ client relationship. Government issued photo ID and a notarized witness of this identification is required.
Your real estate agent will be able to connect you with professionals such as mortgage brokers, building inspectors, lawyers, and property managers who can assist you. Besides opening a bank account and in some instances meeting face-to-face with a lawyer, everything can be done from outside of Canada. If you do intend to move to Squamish and rent before you purchase, your real estate agent can also assist with this too.
Here at Move to Squamish we represent buyers from around the world investing and moving to Squamish. As an internationally recognized mecca for outdoor activities, one of the fastest growing towns in Canada, and in close proximity to both Vancouver and Whistler (40 minutes to each), there is increasing demand from non-resident buyers. If you’re thinking of buying in Squamish, contact the Team at Move to Squamish today, under most circumstances our service is free of charge for buyers and we pride ourselves in going above and beyond for our non-resident clients.