Investing in a secondary home in Quebec

January 31st, 2020

Quebec, you love it. However, due to a lack of time or your choice of lifestyle, you cannot live there all year round … That’s ok, the market for second homes in Quebec has been on the rise for several years, attracting more and more American vacationers, but also from around the world and especially from Europe. Why make such an investment? What is the process for acquiring a secondary home? Here are some great tips for enjoying Quebec when you want.

Why invest in a second home in Quebec

Retired people (around 80%), lovers of Canada and, increasingly, investors, choose Quebec as their second home. But why?

With a dynamic economy, an exceptional living environment, the weakness of the Canadian dollar compared to American and European currencies in particular, investing in real estate in Canada is certainly a good idea. But that’s not all. It turns out that an investment in Quebec, in particular, is 2 to 3 times cheaper than that made in Toronto or Vancouver. With an affordable cost, vacationers have the choice to invest in the type of residence they like (house, condo …) and in a superb environment.

Economically speaking, the business is even better because the exchange rates are favorable for investors and bank borrowing rates are low.

In addition, there are no restrictions on the type of property in which you want to invest, when you are a non-Canadian resident – that is, a person who has no income and therefore does not complete a return, in Canada.

How to invest?

The procedure

The rules for investing in a second home in Quebec are simple, but slightly different from those applicable to a resident.

If you want to take out a mortgage with the Canadian bank, a down payment of 35% of the purchase price is necessary, compared to 20% in general for Canadian residents. Then a letter from your banking institution in your country of origin attesting to the good condition of your file in relation to mortgage loans, personal loans or car loans, and which confirms the availability of cash for the initial down payment. Certain more finicky banking institutions also ask for a statement of the client’s professional situation as well as their income, assets, and liabilities. Since the non-resident has no banking, professional and personal history in Quebec, these documents replace the usual investigation with the Credit Bureau.

In addition, you should know that the loan amortization is capped at 25 years, against 30, for a resident.

Usually, non-residents will have to come to Canada at least twice to complete the process of financing and buying a property, including opening a Canadian bank account.

The tax consequences of a second home

On rental income

If the property is rented at certain periods, the rental income will be taxable. For non-resident owners, the Canada Revenue Agency requires a deduction of 25% of rental income, as soon as it is collected. In February of the following year, the owner will have to complete a tax return for his rental income from which he can deduct expenses, and the taxes collected in excess will then be refunded, if applicable.

On the resale of the second home

When a non-resident resells their property, they are taxed on the capital gain at the same rate as residents, but without being entitled to the basic personal exemption.