What special considerations need to be made for a US citizen who wishes to purchase a house in Canada?
"About deducting mortgage interest: No, you can not deduct it unless it is qualified mortgage interest. ""Qualified mortgage interest is interest and points you pay on a loan secured by your main home or a second home."" (Tax Topic 505).  According to the IRS, ""if you rent out the residence, you must use it for more than 14 days or more than 10% of the number of days you rent it out, whichever is longer.""  Regarding being taxed on income received from the property, if you claim the foreign tax credit you will not be double taxed. According to the IRS, ""The foreign tax credit intends to reduce the double tax burden that would otherwise arise when foreign source income is taxed by both the United States and the foreign country from which the income is derived.""  (from IRS Topic 856 - Foreign Tax Credit)   About property taxes: From my understanding, these cannot be claimed for the foreign tax credit but can be deducted as business expenses. There are various exceptions and stipulations based on your circumstance, so you need to read the official publications and get professional tax advice. Here's an excerpt from Publication 856 - Foreign Tax Credit for Individuals: ""In most  cases,  only  foreign  income  taxes  qualify for the foreign tax credit. Other taxes, such as foreign real and personal property taxes, do not qualify.  But  you  may  be  able  to  deduct  these other  taxes  even  if  you  claim  the  foreign  tax credit for foreign income taxes. In most cases, you can deduct these other taxes  only  if  they  are  expenses incurred  in  a trade  or  business  or  in  the  production  of  in­come.  However,  you  can  deduct  foreign  real property taxes that are not trade or business ex­penses  as  an  itemized  deduction  on  Sched­ule A (Form 1040)."" Note and disclaimer:  Sources: IRS Tax Topic 505 Interest Expense, IRS Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses) , IRS Topic 514 Foreign Tax Credit , and Publication 856 Foreign Tax Credit for Individuals"
What you haven't mentioned is the purchase risk.  You say that she will buy but then say you will be on the loan. If you are on the loan, essentially you will be purchasing a rental property and renting to your mother.  So that is the analysis you need to consider. You need to be financially able to take on this purchase and be willing to be a landlord. The ten year timeline looks good on paper. This may not be realistic, especially with an aging parent.  What if after 4 years, she can't stay in that condo?  What renting buys is flexibility. If she needs money for any reason, it is not tied up in an asset and unavailable. She is able it move if necessary. If she won't need the money, she should buy in cash. That, by far, gives her the best deal. If you're a non resident then you owe no capital gains tax to Canada. Most banks won't let you make trades if you're a non-resident.  They may not have your correct address on file so they don't realize this.  This is not tax law but just OSC (or equivalent) regulations. You do have to fill out paperwork for withholding tax on OAS/CPP payments.  This is something you probably already do but here's a link .  It's complicated and depends on the country you live in. Of course you may owe tax in Thailand, I don't know their laws. I had an RRSP account with a managed services account at a major Cdn bank that increased its fees to $125 a year per account.  Because I could not trade any of my funds living in the US, it made no sense to throw away $500 a year for nothing (two accounts for me and two accounts for my wife - regular RRSP and locked in RRSP).  I was able to move all my accounts to TD discount brokerage without any issue.  I did this two years ago. Danger. The affidavit is a legal document. Understand the risk of getting caught. If you are planning on using the condo to generate income the chances that you default on the loan are higher than an owner occupied property. That is why they demand more down payment (20%+) and charge a higher rate.  The document isn't about making sure you spend 183+ nights a year in the property, it is making sure that it isn't a business, and you aren't letting a 3rd party live in the property.  If you within the first year tell the mortgage company to send the bill to a new address, or you change how the property is insured, they will suspect that it is now a rental property.  What can they do? Undo the loan; ask for penalty fee; limit your ability to get a mortgage in the future; or a percentage of the profits How likely is it? The exact penalty will be in the packet of documents you receive. It will depend on which government agency is involved in the loan, and the lenders plan to sell it on the secondary market.  It can also depend on the program involved in the sale of the property. HUD and sister agencies lock out investors  during the initial selling period, They don't want somebody to represent themselves as homeowner, but is actually an investor. Note: some local governments are interested not just in non-investors but in properties being occupied. Therefore they may offer tax discounts to residents living in their homes. Then they will be looking at the number of nights that you occupy the house in a year. If they detect that you aren't really a resident living in the house, that has tax penalties. Suggestion: If you don't want to wait a year buy the condo and let the loan officer know what your plan is. You will have to meet the down payment and interest rate requirements for an investment property. Your question implies that you will have enough money to pay the required 20% down payment. Then when you are ready buy the bigger house and move in. If you try and buy the condo with a non-investment loan you will have to wait a year. If you try and pay cash now, and then get a home equity loan later you will have to admit it is a rental. And still have to meet the investor requirements. "The first issue you'll find is that if you aren't going to immediately live in the house as a primary residence, this property counts as a ""second home"" or ""investment property"". You'll generally pay a higher interest rate, have a larger down payment, and qualify for less government-backed programs/incentives/subsidies than you would otherwise. The lending criteria on such properties is always more strict - and generally more costly - than an equivalent primary residence. Lenders won't really care that in 10 years you or your parents plan to move in - you can't be held to that, so they'll generally ignore that plan entirely. On a related note, you should be aware that insurance for the property will also generally cost more, but you'd need to get quotes to determine if that is at all significant in your situation. You'll need to talk with a few potential lenders, but from a first read it sounds like it would be best ""storied"" like so: you and your parents want to buy a 2nd home or vacation home, which you'll share the use of (vacations, etc, and being converted to a primary residence later). It'll need to be clear what plan to use the property for - if you intend to rent out the home in the interim years then instead make that clear and state it will be an investment home; if it is what you are planning it might make it easier, as expected rent for the property will be considered. Saying you want a mortgage for a home no one will live in for a decade probably isn't a good idea, as a general plan anyway. Either way, this can be called a ""joint mortgage"". When I was a loan officer we didn't use that term, but it's basically just a mortgage application with multiple people on it, all of whom are combined together to qualify for the loan. Everyone's income, debts, assets, and credit get included, which can work or one person's situation can cause the whole thing to collapse. From your description I think this could work for you, and one option is to set it up where only one of the parents is on the application if the other parent has problematic credit situation. Note that his possibility is often restricted by local law, so it may not be an option for you in your jurisdiction, but worth being aware of. An alternative is you just buy the property and the parents gift you the down payment, and you list them as beneficiaries in will/trust in case something happens to you before they retire, but I don't know if that would make any sense in your situation. This is a single applicant mortgage, and it means only you are considered as buying it, which sometimes is the only option depending on your parents current financial situation. It's usually something you try if the other option doesn't work, but it's a fallback plan. Some lenders will allow guarantors (co-signers in US parlance), but this will vary by lender and locale - often what they actually want is a joint mortgage, not really a guarantor/cosigner. Finally, you'll need to plan for what happens if things don't go as planned, regardless of what happens. What if your income changes, if either of your parents become deceased in advance of retirement, if they get a divorced from each other, or if either/both become ill or disabled and need assisted care? Planning for such unpleasant possibilities (even if they seem crazy and not going to happen in your mind right now) can save you all a tremendous amount of heart ache later on when the unexpected (including things I didn't mention) pops up." "Get everything in writing. That includes ownership %, money in, money out, who is allowed to use the place, how much they need to pay the other partners, who pays for repairs, whether to provide 'friends and family' discounts, who is allowed to sell, what happens if someone dies, how is the mortgage set up, what to do if one of you becomes delinquent, etc. etc. etc. Money and friends don't mix. And that's mostly because people have different ideas in their head about what 'fair' means. Anything you don't have in writing, if it comes up in a disagreement, could cause a friendship-ending fight. Even if you are able to agree on every term and condition under the sun, there's still a problem - what if 5 years from now, someone decides that a certain clause isn't fair? Imagine one of you needs to move into the condo because your primary residence was pulled out from under you. They crash at the condo because they have no where else to go. You try to demand payment, but they lost their job. The agreement might say ""you must pay the partnership if you use the condo personally, at the standard monthly rate * # of days"". But what is the penalty clause - is everything under penalty of eviction, and forced sale of the condo and distribution of profits? Following through on such a penalty means the friendship would be over. You would feel guilty about doing it, and also about not doing it [at the same time, your other partner loses their job, and can't make 1/3rd of the mortgage payments anymore! They need the rent or the bank will foreclose on their house!] etc etc etc Even things like maintenance - are the 3 of you going to do it yourselves? Labour distributed how? Will anyone get a management fee? What about a referral fee for a new renter? Once you've thought of all possible circumstances and rules, and drafted it in writing, go talk to a lawyer, and maybe an accountant. There will be many things you won't have considered yet, and paying a few grand today will save you money and friends in the future." To build a US credit record, you need a Social Security Number (SSN), which is now not available for most non-residents.   An alternative is an ITIN number, which is now available to non-residents only if they have US income giving a reason to file a US tax return (do you really want to get into all that...). Assuming you did have a reason to get a ITIN (one reason would be if you sold some ebooks via Amazon US, and need a withholding refund under the tax treaty), then recent reports on Flyertalk give mixed results on whether it's possible to get a credit card with an ITIN, and whether that would build a credit record.  It does sound possible in some cases.   A credit record in any other country would not help.  You would certainly need a US address, and banks are increasingly asking for a physical address, rather than just a mailbox. Regardless, building this history would be of limited benefit to you if you later became a US resident, at that point you would be eligible for a new SSN (different from the ITIN) and have to largely start again. If getting a card is the aim, rather than the credit record, you may find some banks that will offer a secured card (or a debit card), to non-residents, especially in areas with lots of Canadian visitors (border, Florida, Arizona).  You'd find it a lot easier with a US address though, and you'd need to shop around a lot of banks in person until you find one with the right rules.  Most will simply avoid anyone without an SSN. So how do you buy a house in or near Toronto?  What are the numbers? So basically $800,000 for a starter house. Here in the midwest you would need to make $250,000 minimum to qualify for that mortgage. 2.5 time income. Is everyone renting?  I see that in California?    Also rents don’t support the house value in the Bay Area. So basically property managers are renting not for profit but for value growth. Most of the years I filed while a non-resident of the US, I didn't owe a dime to the US government. Same was actually true for Canada, though I did have some income there that was eligible for taxation. AFAIK, even if I hadn't, I would have been required to file, but perhaps that isn't necessary for everyone. "I'm a little confused on the use of the property today.  Is this place going to be a personal residence for you for now and become a rental later (after the mortgage is paid off)?  It does make a difference. If you can buy the house and a 100% LTV loan would cost less than 125% of comparable rent ... then buy the house, put as little of your own cash into it as possible and stretch the terms as long as possible.  Scott W is correct on a number of counts.  The ""cost"" of the mortgage is the after tax cost of the payments and when that money is put to work in a well-managed portfolio, it should do better over the long haul.  Don't try for big gains because doing so adds to the risk that you'll end up worse off. If you borrow money at an after-tax cost of 4% and make 6% after taxes ... you end up ahead and build wealth. A vast majority of the wealthiest people use this arbitrage to continue to build wealth.  They have plenty of money to pay off mortgages, but choose not to.  $200,000 at 2% is an extra $4000 per year.  Compounded at a 7% rate ... it adds up to $180k after 20 years ... not exactly chump change. Money in an investment account is accessible when you need it.  Money in home equity is not, has a zero rate of return (before inflation) and is not accessible except through another loan at the bank's whim.  If you lose your job and your home is close to paid off but isn't yet, you could have a serious liquidity issue. NOW ... if a 100% mortgage would cost MORE than 125% of comparable rent, then there should be no deal.  You are looking at a crappy investment.  It is cheaper and better just to rent.  I don't care if prices are going up right now.  Prices move around.  Just because Canada hasn't seen the value drops like in the US so far doesn't mean it can't happen in the future.  If comparable rents don't validate the price with a good margin for profit for an investor, then prices are frothy and cannot be trusted and you should lower your monthly costs by renting rather than buying.  That $350 per month you could save in ""rent"" adds up just as much as the $4000 per year in arbitrage. For rentals, you should only pull the trigger when you can do the purchase without leverage and STILL get a 10% CAP rate or higher (rate of return after taxes, insurance and other fixed costs).  That way if the rental rates drop (and again that is quite possible), you would lose some of your profit but not all of it.  If you leverage the property, there is a high probability that you could wind up losing money as rents fall and you have to cover the mortgage out of nonexistent cash flow. I know somebody is going to say, ""But John, 10% CAP on rental real estate?  That's just not possible around here.""  That may be the case.  It IS possible somewhere.  I have clients buying property in Arizona, New Mexico, Alberta, Michigan and even California who are finding 10% CAP rate properties.  They do exist.  They just aren't everywhere. If you want to add leverage to the rental picture to improve the return, then do so understanding the risks.  He who lives by the leverage sword, dies by the leverage sword.  Down here in the US, the real estate market is littered with corpses of people who thought they could handle that leverage sword.  It is a gory, ugly mess." For cross-border transactions like this you should really take advice from an accountant or lawyer who specialises in them, because there may be tax treaties between the two that complicate the situation. However, in general borrowing money doesn't have tax implications in itself, and there's no limit as such. You do need to consider the following points: If this is zero or less than you could plausibly get commercially, your friend is effectively giving you the difference between the interest rates. If your friend in Korea has a connection to the US she or he may be subject to the gift tax. In practice this only matters if the total amount of gifts they give to anyone over their lifetime plus the size of their estate over their lifetime is large. Non US-persons are exempt though if the amounts are large enough they may need to be reported. Financial institutions are generally required to report large international transactions (typical thresholds are around $10,000) for scrutiny by the government, in case the transaction is related to something illegal. This shouldn't be a problem in itself but you should be aware it'll happen. It shouldn't make any difference how you transfer the money, but it would be wise to get as much documentation as possible in case of later questions. The best place to get further advice would be the US bank you'll be transferring the money into initially. This is really a question for a lawyer given the cross-border nature of the transaction, but you and your friend should sign a contract specifying how and when the loan will be repaid. Your friend should also consider setting up the loan as a mortgage and taking a charge on your home. Even if your friend trusts you, a charge on the home will protect him or her in the event of you having financial problems and another creditor laying claim to the home. In comparing housing to investing in a stock market, the author claims housing is a poor investment because houses depreciate.  He's forgetting about the land component.  The improvement on the land is only a portion of the value, and it's the only part that depreciates.  In markets where the prices have risen significantly the value is largely in the land.   Land has a finite supply, which is even more evident when we are looking at land located where people actually want to live.  While strong banking controls kept Canada from suffering the same crash in the second half of the 2000's; availability of land where people actually want to live is likely responsible for a lot of the divergence between the US and Canada.  Most Canadians live within 100 kilometres of the border between the two countries; as the weather makes living more northern undesirable.  The US has lots of available land in places with a better climate than a lot of Canada.  Sure, there's some highly desirable places to live in the US where prices have skyrocketed; but the scarcity of desirable land affects all of Canada and is not going to go away. For margin, it is correct that these rules do not apply.  The real problem becomes day trading funding when one is just starting out, broker specific minimums. Options settle in T+1. One thing to note: if Canada is anything like the US, US options may not be available within Canadian borders.  Foreign derivatives are usually not traded in the US because of registration costs.  However, there may be an exception for US-Canadian trade because one can trade Canadian equities directly within US borders. "Since you did not treat the house as a QBU, you have to use USD as your functional currency.  To calculate capital gains, you need to calculate the USD value at the time of purchase using the exchange rate at the time of purchase and the USD value at the time of sale using the exchange rate at the time of sale.  The capital gain / loss is then the difference between the two.  This link describes it in more detail and provides some references: http://www.maximadvisors.com/2013/06/foreign-residence/ That link also discusses additional potential complications if you have a mortgage on the house. This link gives more detail on the court case referenced in the above link: http://www.uniset.ca/other/cs5/93F3d26.html The court cases references Rev. Rul 54-105.  This link from the IRS has some details from that (https://www.irs.gov/pub/irs-wd/0303021.pdf): Rev. Rul. 54-105, 1954-1 C.B. 12, states that for purposes of determining   gain, the basis and selling price of property acquired by a U.S. citizen living in a foreign country should be expressed in United States dollars at the rates of exchange prevailing as of the dates of purchase and sale of the property,   respectively. The text of this implies it is for U.S. citizen is living in a foreign country, but the court case makes it clear that it also applies in your scenario (house purchased while living abroad but now residing in the US): Appellants agree that the 453,374 pounds received for their residence should be translated into U.S. dollars at the $1.82 exchange rate prevailing at the date of sale. They argue, however, that the 343,147 pound adjusted cost basis of the residence, consisting of the 297,500 pound purchase price and the 45,647 pounds paid for capital improvements, likewise should be expressed in U.S. dollar terms as of the date of the sale. Appellants correctly state that, viewed “in the foreign currency in which it was transacted,” the purchase generated a 110,227 pound gain as of the date of the sale, which translates to approximately $200,000 at the $1.82 per pound exchange rate. ... However fair and reasonable their argument may be, it amounts to an untenable attempt to convert their “functional currency” from the U.S. dollar to the pound sterling. ... Under I.R.C. § 985(b)(1), use of a functional currency other than the U.S. dollar is restricted to qualified business units (""QBU""s). ... appellants correctly assert that their residence was purchased “for a pound-denominated value” while they were “living and working in a pound-denominated economy,” ... And since appellants concede that the purchase and sale of their residence was not carried out by a QBU, the district court properly rejected their plea to treat the pound as their functional currency." Most US banks don't allow you the ability to draft a foreign currency check from USD. Though, I know Canadian banks are more workable. For instance, TD allows you to do this from CAD to many other currencies for a small fee. I believe even as a US Citizen you can quite easily open a TD Trust account and you'd be good to go. Also, at one time Zions bank was one of the few which lets US customers do this add-hoc. And there is a fee associated. Even as a business, you can't usually do this without jumping thru hoops and proving your business dealings in foreign countries. Most businesses who do this often will opt to using a payment processor service from a 3rd party which cuts checks in foreign currencies at a monthly and per check base. Your other option, which may be more feasible if you're planning on doing this often, would be to open a British bank account. But this can be difficult if not impossible due to the strict money laundering anti-fraud regulations. Many banks simply won't do it. But, you might try a few of the newer British banks like Tesco, Virgin and Metro.