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Advantages of Investing in Property in Canada


There are many reasons why both local and foreign investors invest in Canadian mortgage  and real estate especially compared to the rest of the foreign housing market. Owning a property in the country can turn out to be a profitable prospect provided that you understand how the tax laws apply to real estate investments.

One of the most convenient aspects of owning a Canadian mortgage is that it does not require you to have a residency or citizenship in the country. However international investors might need to apply for a Canadian residency on a temporary basis and comply with immigration requirements especially if they plan on applying for permanent residency along the way.

Rental Property Tax

According to the Canadian Income Tax Act 25% of the gross property rental income has to be remitted annually. Non residents can pay this percentage of the rental income after filling the NR6 form. You can reclaim taxes that you have already paid for if the rental property in question incurs net losses.

Selling Property

If you sell Canadian property as a non-resident the Canadian government is entitled to 50% of the sale as a withholding tax. American citizens who sell a property in Canada will have to report the capital gain to the IRS (Internal Revenue Service).

Home Equity Loans

You can use a HELOC (home equity line of credit) or reverse mortgage if you want to get out of a Canadian residential property.  Reverse mortgages might not be a favorable prospect for everyone. However they do make it possible for people who are over 60 to take out payments that amount to 40% of a home’s current value in appraisal.

In such case no payment is required and the process does not involve any taxes either. If the funds are invested in an income producing asset the interest expense can be written off. The owner can also live in the home for as long as he/she wants. The loan will end in case the owner dies or sells the home. In the case of the latter, the loan is paid off with the proceeds from the sale.

A HELOC on the other hand is a second mortgage on a home. It is used to secure a credit line or loan. As compared to conventional mortgages a HELOC offers homeowners the convenience of paying off an amount any time without the fear of being penalized.

In hindsight Canadian laws are quite lax where owning real estate is concerned. A person does not have to be a permanent resident or even live in the country in order to take advantage of them. The interest expenses and property taxes are tax deductible. However it is still important that you review current Canadian housing laws before you even think of investing in real estate in the country especially in aspects like owning property, living in it or renting it. Once you know all you need to applying for mortgage should be easy. 

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