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How to Finance Your US Real Estate Property Purchase As a Canadian

How to Finance Your US Real Estate Property Purchase As a Canadian

Financing options include: US Mortgage, Canadian Mortgage, Canadian Line of Credit, Private Lender

Most Canadians that are buying US real estate property, especially in Florida, don’t have the full amount of cash upfront to pay for the property.  If you do, then you are very lucky.  Most Canadians that end up buying any form of real estate, whether it be in Canada or the USA, usually use a mortgage loan product to fund the purchase of the real estate.

US Mortgage:  Obtaining a US mortgage is not easy.  As a non-resident and foreign individual (yes, Canadians are foreign to the USA), you are considered a higher risk than a US resident and therefore are more likely to pay a premium for obtaining a US mortgage.  The main reason for this is simply because you do not live in the US and you will therefore not have a US social security number or any income or financial assets in the USA.  You also likely do not have a US credit score, because you don’t have US credit products.  The US lenders need to look at your Canadian credit score to judge if you are worthy of a loan.  However, if you default on a US loan, it does not show up on your Canadian credit report.  You have to think about it from the perspective of the lender, if you are a US lender, and someone from a foreign country such as China, Mexico, Canada comes to you and asks you for money and promises to pay you back, but you have no credit history on them locally, would you give them a loan?

In another section of this website, we discuss in detail how to obtain a US mortgage and the steps involved.  It is not impossible but highly unlikely you will obtain a loan.

 

Canadian Mortgage:  Since the process of obtaining a US mortgage is so difficult for Canadians, many Canadians simply try to apply for a loan in Canada to fund their US real estate property purchase.  The advantage of this is that you have an establish credit history in Canada and the lenders in Canada are more likely to give you a loan than those in the US. You can try to obtain a second mortgage on your current residential property or you can obtain a line of credit based on all your assets.  You need to think about which is cheaper for you from an interest rate perspective.  Lastly if you cannot obtain any further credit in Canada from a bank, you may want to go to a private lender.  You should talk to the seller of your real estate, the developer, and a real estate agent to see if they can refer you to private lenders that can you help you purchase US real estate with funding.

Tip: Remember that obtaining a mortgage in Canadian dollars and buying a property in US dollars means that you will need to convert money from Canada to the USD.  You are also exposed to some currency risk as the value of the US real estate property changes.