Financing US investment properties for Canadians
If you plan on purchasing a US residential investment property you will have less financing options than purchasing property domestically. Canadian banks will not provide financing on US properties, but there are US lenders with Canadian affiliation such as RBC Bank and TD Bank that will. These are usually the best options for Canadians, as US banks with no Canadian affiliation don’t really want to deal with foreign nationals and it’s typical for them to charge additional interest rate premiums which can be 200 bps or more. Additionally, banks with Canadian affiliation have faster approval times having familiarity dealing with Canadian borrowers, and having access to your Canadian credit history. For an investment property you should expect you’ll need to make a down payment of 35-40 percent versus 20 percent versus for a vacation home. Note that if you have multiple Canadian properties already this might exclude from getting financing regardless of your credit score or debt service ratio, which was my personal experience with TD Bank. Alternatively, if you have Canadian real estate with equity you could also refinance and purchase the US property with Cash.
As far as closing costs you can expect to pay roughly 3-5 percent in fees for expenses such as inspection, appraisal, title insurance, and an origination fee which covers the lenders work for processing the mortgage. Note that the origination fee which is typically about 1% the value of the loan is normally due at closing and can’t get rolled into the value of the home.