When buying a property in Canada there are several important financial matters that must be taken into account and planned carefully at the very beginning of your journey. These are the areas that you need to consider.
1. What is your total budget?
How much money do you have to spend on your property purchase? This includes the property itself, the buying process (and fees) and any ongoing costs once you have purchased the property. The additional costs along the way include things like real estate agent and legal fees, visits to the property for viewings and more, and other additional services that you may need along the way, such as a mortgage broker. Make sure that you consider these areas as far in advance in possible to ensure you are not left disappointed further down the line with surprise costs and bills.
2. How will you fund the property purchase?
There are a number of ways that you can fund your purchase in Canada: with a mortgage, releasing equity from another property or pay with cash. As a non-resident in Canada, you may find that there are different mortgage requirements than if you were a resident. For example, you will be required to pay a down payment of at least 35%.
3. Have you considered the effect currency market movements have on the property price?
The price of your property in your home currency will be significantly affected by the constantly fluctuating exchange rate during the purchase process. This is why we recommend opening an account with a currency exchange specialist like Halo Financial as soon as possible. Halo’s Currency Consultants can help you make the most of your money when you make the transfer into Canadian Dollars, thanks to their extensive expertise and numerous tools and resources. By minimising risk and saving money against the constantly fluctuating market, you will make the most of any international money transfer you need to make throughout the Canadian property purchase process. A currency exchange specialist at Halo Financial will be able to offer you better exchange rates and will not charge fees on any transfers above £5,000.
4. How will you pay ongoing costs associated with owning a property in Canada?
The financial areas you need to consider do not end once you have bought a property in Canada. There are ongoing costs associated with purchasing a home in Canada and with your emigration, such as paying utility bills, property maintenance, and any mortgage payments. If you are transferring money overseas in order to make these payments, you they will be subject to changing exchange rates. Maintaining an ongoing conversation with the Currency Consultants at Halo Financial will be help you stay on top of the moving currency markets and work out the best time for you to make your foreign exchange. You may benefit from setting up automatic regular payments to do this – speak to a Currency Consultant to find out the different currency transfer services available to you.
If you will be living off pension payments in Canada, you will need to assess whether you can transfer your pension to a scheme in Canada, and if so how this will affect how much you receive. There is a double taxation scheme between Canada and the UK, for example, so you could continue to draw your pension in the UK, transfer it to Canadian Dollars using a currency specialist to ensure the best deal, and you would not have to pay tax on this.
Canada’s major retirement scheme is the Canadian Pension Plan (CPP). You will not be enrolled automatically into CPP so will need to apply to join. You can qualify for a CPP retirement pension if you have worked in Canada and made at least one valid contribution to the scheme. You must be 60 years of age to start receiving your pension. However, the CPP will reduce your pension amount by a set percentage for each month that you take it before age 65.
In addition to the CPP scheme, most Canadian pensioners – at least those who have lived in the country for at least ten years since they turned 18 – should also be entitled to receive the Old Age Security (OAS) Pension. You must be 65 or older to receive payments through this scheme. You do not necessarily need to have ever been employed in Canada to receive payments through this scheme, although this will obviously impact on the amount of money you are entitled to. Once you reach the age of 65, you will need to apply to start receiving your OAS pension.
We do of course recommend speaking to an independent financial advisor or pension expert to ensure you are making the best of any funds and know your tax obligations in Canada and elsewhere.
6. Do you have a bank account in Canada?
We recommend opening a bank account in Canada as soon as you can. This process will depend on which bank you are using and the type of services/accounts that you are applying to use. The good news is that opening a basic checking account before you emigrate is usually possible (especially when using one of the larger banks) and fairly straightforward. However, you will often need proof that you have applied to live in Canada and will, usually, need to be physically present at the bank to activate the account.
It should be noted here that most bank accounts – at all banks – charge a small monthly fee with the amount differing depending on the kind of account you have. However, according to the Canadian Banking Association, 60 percent of Canadians spend CDN$15 or less per month on service fees.
7. Average salaries in Canada
Average weekly wage: CDN$986 a week (September 2017)
Average annual wage: Approx. CDN$51,000 (September 2017)
8. Tax in Canada
In addition to federal income taxes, provincial taxes are also levied on wage-earners. Provincial income tax rates vary from between 4 and 21 percent of your income, depending on the province in which you live and how much you earn.
For the latest income tax brackets, visit https://taxfoundation.org/2017-tax-brackets/
9. Cost of living in Canada
Five Canadian cities feature in Mercer’s annual Cost of Living Index, which ranks 214 cities worldwide in order of most expensive by measuring the comparative cost of over 200 items in each location. These items include transport, food, clothing, household goods, the cost of housing and entertainment.
Canadian cities were found to be very affordable, with no cities placed in the top 100 most expensive locations. This is how they ranked in 2018:
Vancouver – 109th
Toronto – jointly 109th
Montreal – 147th
Calgary – 154h
Consider the different insurance policies you will need if you are moving to Canada or buying a property in Canada as a holiday home. First of all, insurance policies will need to cover your property and belongings, then you will also need to organise any car insurance, should you purchase a car in Canada, any private healthcare for you and your family (if appropriate), and any business insurance policies you may need to take out if you are setting up a business in Canada.