Getting a Mortgage in Canada from the UK

Guide for Canadian Expats in the UK Buying Property in Canada with an Expat Mortgage

Can Canadian Expats get a Mortgage in Canada?

Yes! As a Canadian citizen living abroad, you can get a mortgage in Canada, though the process may have additional requirements compared to residents. With the right steps and professional guidance, securing an expat mortgage is achievable.

Morgan Englebretsen is part of the CIL Expat Expert Team and has been serving Canadians Since 2020. Splitting time between Montreal and London, UK, Morgan brings a global perspective to the Expat mortgage process.

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Key Steps to Getting a Mortgage as a Canadian Expat

1. Mortgage Eligibility for Non-Residents

Canadian citizens living abroad are generally eligible for mortgages in Canada.
Lenders assess your income, credit history, and the property's purpose (rental or personal use).
Permanent residents may qualify for better terms than foreign buyers.

2. Down Payment Requirements

A 35% down payment is typically required for non-residents.

3. Income & Employment Verification

Lenders will closely examine your foreign income. Be prepared to provide:

Employment Letter – Confirming your job, salary, and employment status.
Foreign Tax Returns or Pay Stubs – Demonstrating consistent income.
Bank Statements (Last 3-6 Months) – Showing financial stability.
Pro Tip: Some lenders prefer income from financially stable countries (e.g., UK, USA, Australia).

4. Credit History & Debt Assessment

A strong UK credit history is essential
Debt-to-income (DTI) ratio plays a key role in approval.
Tip: Having a Canadian bank account and active Canadian credit history can improve eligibility.

5. Mortgage Options & Interest Rates

Canadian expats are eligible for standard fixed or variable-rate mortgages.
Interest rates may be slightly higher than those for residents.

6. Mortgage Broker Assistance

Working with a mortgage broker specializing in non-resident buyers can help find the best lender and mortgage terms.

7. Tax & Legal Considerations

Non-residents may be subject to land transfer taxes and non-resident speculation taxes in some provinces.
Consult with a cross-border financial and legal advisor to understand tax implications.

8. Home Insurance Requirement

Lenders require proof of home insurance to protect against risks like fire or theft.

9. Currency Exchange Considerations

If your income is in foreign currency, exchange rate fluctuations can impact mortgage payments.
Some lenders may only consider a portion of foreign income to account for this risk.

10. Stay Informed About Regulations

Stay updated on foreign buyer regulations and any changes in Canadian real estate laws.
Some restrictions apply to non-Canadian buyers, though Canadian citizens are exempt.

11. Finalizing the Purchase

You may need to be physically present in Canada to sign legal documents.
Work with a Canadian lawyer or notary to ensure all legal requirements are met.

Renting out property in Canada as a UK resident

This involves navigating both Canadian and UK tax obligations, as well as managing cross-border income effectively. Here's a concise guide to assist you:

1. Canadian Tax Obligations for Non-Resident Landlords

Withholding Tax: As a non-resident landlord, you're subject to a 25% withholding tax on your property's gross rental income in Canada. This tax is typically withheld and remitted to the Canada Revenue Agency (CRA) by your tenant or a designated agent.
Net Rental Income Election: To potentially reduce your tax liability, you can elect to pay tax on your net rental income (gross income minus allowable expenses) by filing an NR6 form before the first rental payment of the year. This election allows for the deduction of expenses such as property management fees, repairs, and mortgage interest.

2. UK Tax Obligations

Declaring Foreign Rental Income: As a UK resident, you're required to report your worldwide income, including Canadian rental income, on your Self Assessment tax return.
Foreign Tax Credit Relief: To avoid double taxation, you can claim Foreign Tax Credit Relief for the Canadian taxes paid on your rental income. This relief offsets the UK tax due on the same income, ensuring you're not taxed twice.

3. Managing Cross-Border Income with Foreign Debt

Currency Exchange Risk: If your mortgage is in a currency different from your rental income (e.g., a UK mortgage paid with Canadian rental income), you're exposed to exchange rate fluctuations. To mitigate this risk, consider:
- Hedging Strategies: Utilize financial instruments to lock in exchange rates.
- Foreign Currency Accounts: Maintain accounts in both currencies to manage timing differences in income and expenses.
Interest Deductibility: Ensure that the interest on your mortgage is deductible against your rental income. In Canada, mortgage interest is generally deductible when calculating net rental income for tax purposes.

4. Professional Advice

Engage Tax Professionals: Given the complexity of cross-border taxation, it's advisable to consult with tax professionals experienced in both UK and Canadian tax laws to ensure compliance and optimize your tax position.