Every year, a number of Canadian snowbirds decide to take the plunge and buy a U.S. vacation home - either for personal use, as an investment property or a combination of both.
And while some can afford to pay cash for their U.S. vacation property, many require some sort of financing to be able to make their purchase.
For those snowbirds who require financing to buy their U.S. vacation property, there are three primary options available:
- Get a mortgage on your Canadian home in CAD
- Get a Home Equity Line of Credit (HELOC) on your Canadian home in CAD
- Get a mortgage in the U.S. on the property you are purchasing in USD
If you’re considering obtaining financing to purchase a U.S. property, it’s important to understand that the process and requirements differ in the U.S. vs. Canada.
We spoke with Alain Forget, Head of Sales & Business Development, RBC Bank (Georgia) NA to provide some insight on the process for Canadians to obtaining a U.S. mortgage and how it differs from obtaining a mortgage/ HELOC in Canada.
And to help you navigate these differences, we’ve also created the following “cheat sheet” that compares financing options in Canada vs. the U.S.
A few important points about the chart below:
- The chart provides an overview of the differences between obtaining financing in the U.S. and Canada. Choosing which financing option is right for you is a different issue and will depend on your unique situation.
- RBC’s Forget notes that Canadians should keep in mind that while it may take longer to get a U.S. mortgage (30 to 45 days) and closing costs are higher due to the heavily regulated process, U.S. mortgages do offer some advantages, including allowing you to avoid having to convert the full purchase price from Canadian dollars to U.S. dollars at an unfavourable exchange rate all at once.
- If you’re considering obtaining a mortgage in the U.S., you’ll want to deal with a Canadian bank that has operations in the U.S. (or a U.S. lender that specializes in lending to Canadians), as the process will be faster, easier and less costly.
Most U.S. banks won’t offer mortgages to Canadians and those who do will usually charge you a hefty premium for being a foreign national. On the other hand, Canadian banks with U.S. operations will use your Canadian credit history to approve your U.S. mortgage and won’t charge you a foreign national premium.
|
CANADIAN MORTGAGE/HELOC |
U.S. MORTGAGE |
|
|---|---|---|
|
Can I get pre-approved? |
|
Yes. Pre-approval takes 1-2 days and can be valid for up to 60 days. |
|
How long does it take to get a mortgage/HELOC? |
About a week |
30 - 45 days |
|
Required Information |
Income, marital status, debt, net worth, other properties you own, etc. |
Similar to Canada |
|
Documentation you’ll need |
If you’re self-employed:
If you’re employed:
|
|
|
How much can I borrow? |
|
|
|
Down payment requirement |
|
Down payment requirements may be higher for properties with a purchase price over $2 million |
|
Types of Rates Available |
|
Fixed |
|
Term Limits Available |
6 months – 10 years
|
3, 5 and 7 Years Usually 30-year amortization |
|
Costs |
Mortgage & HELOC: (Approximately $1,000 - $2,500)
|
Mortgage:
Keep in mind that total closing costs in the U.S. are approximately 3 – 5% of the mortgage amount, depending on the State. These costs include:
|
Additional Resources
- For more information about snowbird mortgage options for U.S. vacation properties, check out our Top Mortgage Tips for Canadian Snowbirds
- However you choose to finance your U.S. real estate purchase, we strongly suggest that you consult a cross border tax expert to determine which U.S. real estate ownership structure is right for you to save you and your family a bunch of money and headaches down the road.
