Can international student buy a house in Canada?

Even as a student, owning a house in a country like Canada sounds like a great idea,

For what is worth it, the real estate market in the country is doing great and will remain so for a long time.

Everyone knows Canada for its welcoming residents, and high quality of life, but not many know that the country has a strong real estate market.

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Recently, Canada experienced one of the world’s lowest vacancy rates at 1.5%.

Data from the Canada Mortgage and Housing Corporation (CMHC) shows that renting is more expensive now than before.

Buying a house here is a sound investment even for a student, (it looks even better if you plan to stay in the country for an extended period after your studies or even settle down permanently).

However, you can’t own a house in the country as a student if the laws forbid it – which is why you must know what the law says before considering this idea.

Here is a look into the legal eligibility for international students to buy a house in Canada – what the law says – to help you make an informed decision.

Can international student buy a house in Canada?

Yes, an international student studying in Canada is legally allowed to buy a house in the country. However, you need to meet the legal requirements of the province or territory where you plan to purchase a property and consider the financing options plus any additional costs like taxes.

Legal eligibility for an international student to buy a house – what the law says

If you’re an international student in Canada, you’re a temporary resident – not a permanent resident.

Your stay and rights in the country are limited. 

Read also: What happens if an international student gets pregnant in Canada?

You’re allowed to stay in Canada for the duration of your study program, which is usually for the length of your course plus 90 days. 

While you are considered a temporary resident in Canada within this period, it does not necessarily mean you cannot own property.

International students are legally allowed to purchase properties (including a house) in Canada, just like Canadian citizens and permanent residents.

According to the Canadian Mortgage and Housing Corporation (CMHC), international students who are enrolled in a full-time program of study that is at least two years in duration at a recognized Canadian educational institution, or who have received confirmation of acceptance for such a program, are eligible to buy a house in Canada.

If you want to buy a new home in Canada, you can go on and do so.

However, each province and territory in Canada has its own rules and regulations regarding international students buying property.

Therefore, to purchase a house anywhere in Canada, you “must” understand the rules in the province or territory where you want to buy the house.

That’s how it works.

Canadian Mortgage and Housing Corporation (CMHC) has a mortgage loan insurance option for international students who meet its eligibility criteria.

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One of these eligibilities is that you must be enrolled in a full-time program of study (of at least two years) at a recognized Canadian educational institution or have received confirmation of acceptance for such a program.

Challenges you’ll face buying a house in Canada as an international student

When buying a house in Canada as a student, expect the following challenges.

1. Higher down payment: For Canadian citizens and permanent residents, the typical down payment for a mortgage for properties up to $500,000 is 5% of the purchase price, for properties between $500,000 and $1 million, the down payment is 5% of the first $500,000 and 10% of the remaining amount.

For example, if the property is $600,000, the down payment would be $25,000 (5% of $500,000) plus $10,000 (10% of $100,000), totalling $35,000.

While for properties over $1 million, the minimum down payment is 20% of the purchase price.

Is 5% enough for a down payment?

For permanent residents and citizens, yes but for international students and other foreign buyers, 5% is not enough for a down payment.

As an international student, you’ll be required to put down at least 35% of the property’s value – which can be a big challenge.

2. Limited credit history: As a foreigner (international students included), you lack a Canadian credit history, making it harder to secure a mortgage.

Lenders in Canada prefer borrowers with a strong credit history.

3. Higher interest rates: Without a robust credit history, you, an international student will pay higher interest rates, increasing the long-term cost of the loan – lenders will ask for a higher interest rate.

4. Foreign buyer taxes: Some provinces or municipalities in Canada have implemented additional taxes on foreign buyers to address affordability concerns. 

Read also: How to report a student working more than 20 hours

For example, in British Columbia, there is a foreign buyer tax of 20% of the property’s purchase price, and in Ontario, there is a Non-Resident Speculation Tax (NRST) of 15%. 

5. Property taxes and capital gains: Property taxes are levied by the municipality where the property is located and are usually based on the assessed value of the property.

Expect to pay a higher property tax rate as a foreign buyer.

6. Legal challenges: Another issue you’ll face is handling the legal requirements of property purchase, from contracts to property registration – it can be a daunting process without local expertise.

7. Understanding the market: Without a deep understanding of the Canadian real estate market, you’ll struggle to identify good investments and avoid overpriced properties.

8. Property maintenance and management: If you are not planning to reside in the property yourself, you’ve to hire a property management company to oversee the property’s maintenance, renting, and other management tasks – This will add to the overall cost.

9. Exchange rate fluctuations: As an international student, you need to convert foreign currency to Canadian dollars, exposing you to exchange rate fluctuations, which can affect the overall cost.

10. Rental management: If you plan to rent out part of the property, managing tenants and handling rental issues will take much of your time- you need local knowledge here.

If you’re looking for ways to source for funds, you can work with private lenders, and banks or use a co-signer.

Financing options to buy a house as an international student in Canada

As a student, you don’t have a strong credit history in Canada, which will make it hard for you to get a mortgage.

In addition, most Canadian financial institutions will be hesitant to offer a mortgage to an international student.

Therefore, check out options like private lenders:

a) Private Lenders: Private lenders, also known as alternative or non-traditional lenders, are more willing to provide mortgages to international students. 

They usually have more flexible requirements – but higher interest rates.

Read also: I have received my student visa for Canada, how many months before I can travel?

b) Co-signer: Another option is to have a co-signer who is a Canadian citizen or permanent resident. 

A co-signer is someone who agrees to be legally responsible for the mortgage if you are unable to make the payments. 

Having a co-signer with a stable income and good credit history in Canada will increase your chances of getting a mortgage.

c) Home country banks: If you have a good credit history at home, you can explore financing options from banks in your home country.

d) Canadian Banks: With more stringent requirements, some Canadian banks will be willing to work with you.

Furthermore, shop around for more financing options like special private or government programs and offers (both at home and in Canada).

Go with whichever option favours you the most.

Compare mortgage offers from every source to get the best terms and interest rates.

Don’t hesitate to negotiate.

Ensure you work with mortgage brokers, financial advisors, and real estate agents who have experience with international buyers.

We recommend you get a legal team

If you’re buying a house in Canada as an international student, we highly recommend that you work with a legal team.

A qualified real estate lawyer will be useful.

He’ll offer you expert advice, review contracts, and ensure your interests are protected throughout the buying process.

The rules regarding foreigners buying housing property in Canada are subject to change, therefore, you need legal team to stay updated. 

Furthermore, buying a property in Canada does not automatically grant you permanent residency or a change in your immigration status. 

While international students can buy a house in Canada, it’s not as easy as it sounds.

Ultimately, your decision to buy a house in Canada should be made after a careful assessment of your financial resources.

It will certainly cost a lot of money.

References:

Canada Mortgage and Housing Corporation. (n.d.). Buying a Property in Canada. Retrieved from https://www.cmhc-schl.gc.ca/en/buying/importance-knowing-your-legal-rights-when-buying-property-canada

Ontario Ministry of Finance. (n.d.). Non-Resident Speculation Tax. Retrieved from https://www.fin.gov.on.ca/en/bulletins/nrst/2_17.html