With the recent shift in taxation for non-resident buyers in Vancouver, more foreign investors are looking to purchase Ottawa properties. While Canada has no restrictions on who can purchase, the type of real estate, or the amount of properties, the largest issue for the non-resident is typically finance related. Some banks have limits on the number of properties, the amount of money to lend, or won't lend to outside residents. This is typically why the conversation begins with getting the financing sorted. If you are looking to purchase a property without any financing, this will make the process much easier and faster.
Financing and Mortgage Information for Non-Residents
When working with banks and lenders as a non-resident each bank might have different rules that they set, and some will be more strict than others. Typically to purchase an Ottawa property, Canadian banks require that 35% of the purchase price of the home be paid for in cash (some require over 50%!), which is called the downpayment. This downpayment amount typically can't be from gifted funds and sourced back for minimum 30 days in a Canadian bank account. The majority of the banks will trace the source of the down payment 90 days back. The bank or lender will usually also require other supporting documents like an employment letter to verify your job income, bank statements, Canadian credit check, etc. The financing rates for non-residents are the same rates that Candian residents would have. Keep in mind there are "B" or secondary lenders who would charge a higher rate, but have different eligibility requirements.
If you are not familiar with a mortgage broker in Ottawa to assist with your purchase, I can refer you to one who has helped numerous non-resident clients purchase an Ottawa property.
Ottawa Property Purchase Process For Non-Residents
The first step in finding a home or investment property in Ottawa is to contact us so we can get the process started. I have helped numerous non-resident clients purchase in Ottawa. Today we can get quite far with tools like Facetime and video calling, to talk and explain or even viewing properties. Once we have a good idea of what exactly you are looking for, we will make sure that you have the financing side ready. Once you have the green light from a bank or lender, then we start getting you familiar with the different areas or neighbourhoods, along with different styles of properties in Ottawa. We then start viewing things first hand If you have family member or friend already living in Canada, or send an assistant ahead to start looking and seeing properties directly. Since it can be quite costly to travel, we try to do as much ground work before you arrive to allow a much smoother and efficient time while you are here. While you do not need to be in Canada to purchase a property, if you are going to require a mortgage then most banks will require you to have a Canadian bank account which will have to be opened in person.
Once we find a property that you love, we put together an offer to purchase called the "Agreement of Purchase and Sale" which has all of the specific details of the purchase. These details include the price, the closing date (when you get the keys), what is included in the property (chattels and fixtures), the deposit (explained below), and any clauses and conditions. The clauses and conditions are the extra details that would be specific to you and the property - such as a condition of financing which would give you seven days to secure the mortgage from the bank for that specific property. If for some reason you are not able to fulfill the conditions, you are able to be released from the agreement.
The deposit is an amount that accompanies an offer and must be delivered to the other agent usually within 24 hours of the offer being accepted. This deposit amount will vary depending on the property location and price, but is usually anywhere from one percent of the purchase price to five percent. This amount is held in trust by the listing brokerage and is taken into account for your down payment from the mortgage. Typically the funds can be paid by certified cheque, or by wire transfer.
A typical condition to the purchase is having a home inspector visit the property to find any defects or issues that are with the property or that you could expect in the future. The cost for this is between $350 to $550 depending on the property size and location. I can send you a list of highly qualified home inspectors to choose from to help you get a better idea of the property.
To sign the offer, you can choose to print, sign, scan, and send back the document or you can sign digitally. As of July 1st, 2015, electronic signatures are legal in Ontario and allowed to be used for purchasing property. I use digital signatures daily and the majority of clients prefer the ease, which allows them to quickly sign on their tablet or smartphone.
To take ownership of the property, you do not need to be in Canada and can use a notary public in your current country. Keep in mind that a Canadian lawyer can provide you with the specific requirements depending on where you are located.
Closing Costs for Ottawa Home or Condo
You will be subject to the same closing costs as a Canadian resident, which includes land transfer taxes and legal fees. However as a non-resident you will not qualify for the first-time buyer program or land tax rebates. Legal fees will vary depending on the lawyer and purchase price, but you should budget about $1,800 which can include the disbursements. These disbursements are costs that the lawyer encounters such as Title Insurance ($200-$400), Land Transfer Tax, Property Tax adjustment (for the amount paid by the seller beyond the closing date), any adjustments for Utilities or Condo Fees, etc. The lawyer will give you an exact cost breakdown before closing. Keep in mind that many cities outside of Ottawa have additional Land Transfer Taxes or a "welcome tax", but this is not the case in Ottawa.
Ottawa Investment Property For Non-Residents
When looking at an Investment property in Ottawa the returns can vary widely. Some of our clients are focused on cash flow, while others are focused on building equity in the property from the mortgage being paid by the tenant, and others are focused on the appreciation in the property value. Generally speaking, investors in Ottawa are cash flow positive with a 20% downpayment (depending on the property) and yield 4-6% gross return.
If you are looking to move to Ottawa and have questions about the process, the area, or something that wasn't answered above, fill out the form below.