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Canada - Mortgages and Other Financial Issues
In order to apply for a mortgage in Canada you will need to have proof of income and be able to supply the required deposit. Different banks will have different requirements, but for expats that have not been in the country for very long, there may be a requirement for a higher deposit than a Canadian national would have to pay. In recent years the deposit amounts required have been rising.
There are various taxes on properties in Canada and homeowners should be aware of this when buying. If you purchase a property and rent it out then you will be expected to pay income tax on the rent regardless of your own residential status. There are taxes to be paid on the transfer of the property when you buy it. This is based on the value of the property but the percentage to be paid will vary according to the province that you are in, as some provinces do not apply this tax at all. On average you will be expected to pay 1% on the first $200,000 of the value of the property and anything above that amount will be taxed at 2%.
Property Transfer Tax is not applicable to those who are first time buyers, but they must meet certain criteria in order to qualify. You need to be a Canadian citizen or have the status of a permanent resident and you are not permitted to have owned a home anywhere in the world at any time. You must have been resident in that province for a minimum of a year. Within the previous six years you need to have filed a tax return with the Canadian authorities at least twice and the property must be intended as your main home for at least the first 12 months of ownership. The exemption can also be applied to resale homes as well as new build properties in some provinces.
There are several other fees that need to be paid when purchasing a property. These include the cost of a clearance certificate, which could be as much as $1000. Capital gains tax is not a consideration providing that the property in question is the main residence of the owner. You may have to pay goods and services tax if you are purchasing a newly-built property, but there are some reimbursements that can be made if the property is below a certain value. This will vary from province to province.
Buyers should be aware of provincial sales tax but this is included in the original cost of the property so does not require an extra payment to the authorities. Other property taxes include the fees which are set within the local authority. These vary wildly across the country and are payable annually, but are still based upon the value of the property.
Insurance is important for those who are trying to obtain a mortgage as the provider will expect the home to be covered. Insurance companies often carry out an inspection of the property before offering insurance and will make recommendations for repairs if required. Insurance rates vary depending upon the area, value of the property and the insurance company itself.
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