What Canadians should know before buying property across the border
Canadians have been buying property in the U.S. for decades now. Many are looking for a warmer place to spend the winter months. Some want a stable vacation home to escape to. Others simply wish to emigrate there.
The state of Washington is a popular destination for Vancouver residents, and it’s not hard to see why. Being just across the border is a huge plus. But living in Washington also gives you access to several incredible national and state parks, beautiful scenery, great weather and no income tax!
Before you join the ranks of Canadians who own property in Washington, however, there are a few key differences between the process of buying property in Canada and in the U.S. that you should be aware of.
The process of getting a mortgage is different in the U.S.
For Canadians who have applied for a mortgage in a Canadian bank, it can come as a shock to learn that American banks do many things differently.
For starters, the entire process will take much longer in the United States than it would in Canada. In addition, American banks often require bigger down payments on mortgages than Canadian banks do. A typical American down payment on property is usually around 20%.
Interest on the mortgage often compounds much more quickly in the U.S. too. Whereas you might be used to semi-annually compounding interest in Canada, in the United States interest is almost always compounded monthly.
If you sell your U.S. property, you might be double-taxed
Canadian cross-border property owners often run into another unpleasant surprise when they decide to sell their American property.
If you sell a U.S. property for more than you paid for it, you’ll have to pay American capital gains tax first. Then, you’ll also be responsible for Canadian capital gains tax – since Canada taxes the worldwide income of its citizens, not just for property within Canada’s borders.
This double-taxation can be quite a blow, especially if it catches you unawares. It’s important to keep it in mind as you’re deciding whether it’s time to let your Washington house go.
You may be looking to permanently move to the United States, or you might be looking for a Washington property for another reason. Either way, once you have sorted out your visa situation and other logistics for your cross-border move, you can start to think about acquiring property and everything that it entails.