Mortgage situation when buying a house abroad

[bitteeinbit]

Hi,

Let's say I wanted to buy a house abroad (Florida, or anywhere for that matter, could be Europe, South America, whatever). Do I need to get a mortgage from a local bank or could I get one from a Canadian bank? Which would be simplest?

Secondly, how many income tax complications would be added if say, I rented the place out while I was not there several months per year. If I got a mortgage from a Canadian institution, then I suppose I would need to "register" the house/mortgage on my Income taxes, especially if i decide to rent? I don't own a house so have no clue how any of this works, pardon my ignorance. I assume it's even more complicated if the house is abroad. Can interest from a mortgage be deducted on your tax return? What about interest from a foreign institution?

If I don't rent out the place, then am I "free of trouble" from the tax man?

Basically, I want to get a loan with mortgage rates (not personal loan rates), what's the best way, if any, to go about this (besides buying a house)? It all sounds so complicated but given that so many retired people (and not) have houses in the south, I imagine it's not that difficult.

[dexlargo]

Can't answer all of those questions, but I can talk a bit about foreign earned income.

If you make income on this foreign property, that income would be taxable in that jurisdiction. So, if it's in the US, you would have to file and pay US income tax on that amount if it's above the minimum income level.

Additionally, there's a requirement that you report in Canada foreign earned income above a certain amount (I think $50,000.00 CDN) and you have to report whether or not you own any foreign assets. You would then pay Canadian income tax on the eligible foreign earned income.

In the US, I believe that you can deduct mortgage expenses from your income - you definitely could deduct it as a business expense if it's a revenue property.

The US and Canada have a tax treaty (http://www.fin.gc.ca/treaties-conventions/usa_-eng.asp) (see articles VI and XXIV) which mandates that (for you) if you paid income tax in the US, then you can deduct the amount of tax that you paid there from the taxes that you will pay in Canada on that income - but it doesn't prevent you from having to pay taxes in both the US and Canada on that income (at least as I read it - can someone correct me if I'm wrong?).

The real estate issues I don't know anything about.

[kaput]

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[bart]

Common sense says you need to deal with a bank that is where your house is, otherwise how can the bank in canada take a house away thats in another country if you stop paying them... ?

You goto foreign bank, supply them with more paperwork, including canadian equifax, bank accounts, credits cards, and whatever else to prove how much money you have and make, and they will decide if you get a loan.

[Team_Mclaren]

Originally posted by bart
Common sense says you need to deal with a bank that is where your house is, otherwise how can the bank in canada take a house away thats in another country if you stop paying them... ?

You goto foreign bank, supply them with more paperwork, including canadian equifax, bank accounts, credits cards, and whatever else to prove how much money you have and make, and they will decide if you get a loan.

common sense says that since you are not from there, the "foreign" bank really dont give a shit about your canadian credit rating, bank accounts, credit cards and whatever else you have in a foreign country.

Foreign banks can provide you with the loan but they'll likely require a much larger down payment to sercue the loan (>30%?)

[bitteeinbit]

Thanks for the answers so far.

I've looked into loans but the interest rates are pretty damn high (10%) so I'm looking to Canadian institutions while the rates are still low (3.5-5%?). Many foreign institutions are also cut-throat in the sense that if you miss more than like 3 payments they'll seize the house rather than have you accumulate interest.

I also think that keeping it within Canada would be best, but I think it'll complicate tax returns immensely, even if I don't rent it out. I might try to contact some banks and ask about their rates for a personal line of credit. My current bank has a rate of 10.5% which I find ridiculous. I understand that a mortgage rate is lower because of the colateral, but damn... It doesn't help that I have virtually no assets, only a lot of money in the bank and zero debt. They'd probably rather lend to someone who owes 300 000$ already with little money in the bank. I probably wouldn't need 200 000$, just a few grand (10, 20, 30?) at a low rate to get started. If I need more, than I could borrow from a foreign institution.

[kaput]

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[Mar]

My neighbour does foreign mortgage investments, check out her website at www.gettingamortgage.ca, her contact is on there.