In a national market characterized by wildly divergent regional performances ranging from weak purchasing power to red-hot price increases, Canadians might consider looking a bit farther south for their property purchases.
However, the steep drop in the value of the Canadian dollar over the past few years has made taking out a mortgage the more sensible option financially.
“It is not a great time for Canadians to pay cash for a U.S. home,” RBC Bank director of sales and business development Alain Forget told The Globe and Mail
“In the past, many Canadians have used cash to buy their U.S. home. However that means using the equity in your Canadian home, cashing out investments or using your savings. With any of these options you’ll have to exchange your Canadian dollars for U.S. dollars, significantly reducing the cash you have to buy your U.S. home,” Forget added.
Mortgages come with their own peculiarities, though, and Forget advised would-be buyers of U.S. properties to consider factors such as:
- Greater fees, which can range anywhere from 3 to 5 per cent because of titles, property appraisals, and other related expenses;
- Larger required down payments, as much as 20 per cent of the estate’s value;
- Longer amortizations, as the 30-year mortgage model (with the possibility of locked rates within the duration) is still active in the U.S.; and
- More paperwork due to regulatory differences, with more than 10 separate documents required for U.S. transactions.