Can an American Buy a House in Canada? Ban, Mortgages, Taxes

An American can buy a house in Canada, but only in narrow circumstances until January 1, 2027, when Canada’s federal ban on foreign residential purchases is scheduled to expire. Until then, most urban homes and condos are off-limits to non-Canadians, and even buyers who qualify under an exemption face foreign-buyer taxes, stricter mortgage rules, and reporting obligations on both sides of the border that catch first-time cross-border owners off guard.

The Federal Ban and When It Lifts

The Prohibition on the Purchase of Residential Property by Non-Canadians Act took effect January 1, 2023, and now runs through January 1, 2027 after a two-year extension.1Canada.ca. Government Announces Two-Year Extension to Ban on Foreign Ownership of Canadian Housing It blocks anyone who isn’t a Canadian citizen or permanent resident from purchasing residential properties with three or fewer dwelling units — detached homes, semi-detached homes, and condos — inside Census Metropolitan Areas and Census Agglomerations. Those designations cover virtually every Canadian city and mid-sized town.

A violation can bring a fine of up to $10,000, and a court can order the property sold with the buyer recovering no more than what they originally paid.2Government of Canada – Justice Laws Website. Prohibition on the Purchase of Residential Property by Non-Canadians Act Real estate agents, lawyers, or anyone else who knowingly helps a non-Canadian get around the ban faces the same fine. If you don’t fit an exemption below, the earliest date you can legally close on an urban Canadian home is January 1, 2027.

Exemptions That Let You Buy Right Now

Several categories of purchase remain permitted even while the ban is in force:

How Canadian Mortgages Work for Americans

Canada doesn’t have true 30-year fixed-rate mortgages. Loans are amortized over up to 25 or 30 years, but the interest rate is locked in only for a “term” — most commonly five years or less.4Canada.ca. Mortgage Terms and Amortization When the term ends, you renegotiate. Your monthly payment can move significantly every few years, and that interest rate risk sits with you in a way it doesn’t for U.S. homeowners on 30-year fixed loans.

Non-resident borrowing rules are also tighter. Most Canadian lenders require non-resident buyers to put down at least 35% of the purchase price, though some lenders will work with American buyers who have strong credit at 20% down. Lenders typically want the down payment funds parked in a Canadian bank account for at least 90 days before closing so they can verify the source. Non-residents don’t qualify for mortgage loan insurance through the Canada Mortgage and Housing Corporation, the government-backed program that lets Canadian residents buy with as little as 5% down.5Canada Mortgage and Housing Corporation. CMHC Newcomers

Open a Canadian bank account early. Major banks will open accounts for non-citizens, though you may need to appear in person. Two pieces of identification are required — a foreign passport plus another government-issued document showing your name and date of birth or address.6Canada.ca. Opening a Bank Account The 90-day seasoning requirement on down payment funds can delay your closing if you wait.

Provincial Foreign Buyer Taxes and Closing Costs

All buyers in Canada pay a provincial land transfer tax, generally 1% to 2% of the purchase price on a tiered schedule. Legal fees for closing usually run $1,000 to $1,600 plus disbursements and applicable sales tax. Canadian real estate lawyers do work that title companies handle in the U.S., including the title search, document preparation, and fund transfers.

The larger cost specific to foreign buyers is a separate provincial surtax:

  • Ontario applies a Non-Resident Speculation Tax of 25% of the purchase price on residential property bought by a foreign national anywhere in the province, on top of the regular land transfer tax.7Government of Ontario. Non-Resident Speculation Tax
  • British Columbia charges a 20% additional property transfer tax on residential purchases by foreign entities in major metro areas, including Metro Vancouver, the Fraser Valley, Victoria, Nanaimo, and the Central Okanagan.8Province of British Columbia Government. Additional Property Transfer Tax for Foreign Entities and Taxable Trustees

On a $500,000 Ontario home, the NRST alone adds $125,000 at closing. That’s a large part of why some Americans focus on rural properties, smaller provinces, or simply wait for the federal ban to lift.

Taxes You’ll Pay While You Own

Canada charges a federal Underused Housing Tax of 1% of assessed value each year on foreign-owned residential property that sits vacant or underused. It has applied since January 1, 2022.9Canada.ca. Underused Housing Tax Foreign owners must file an annual UHT return even if they think an exemption applies. Skipping the filing triggers a minimum penalty of $1,000 for individuals or $2,000 for corporations, plus additional amounts tied to the tax owed.10Government of Canada – Justice Laws Website. Underused Housing Tax Act – Section 47

British Columbia layers its own Speculation and Vacancy Tax on top for designated areas, and the foreign-owner rate rose to 3% of assessed value starting in 2026.11Province of British Columbia Government. Tax Rates for the Speculation and Vacancy Tax A foreign owner of a vacant Vancouver property can face a combined 4% annual tax on the property’s value.

Renting the property out doesn’t get you out from under Canadian tax. Your tenant or property manager is required to withhold 25% of the gross rental income and send it to the Canada Revenue Agency.12Canada Revenue Agency (CRA). Filing and Reporting Requirements – Rental Income and Non-Resident Tax That’s on gross rent, before mortgage payments, management fees, repairs, or anything else. A property collecting $3,000 in monthly rent but with $2,200 in monthly expenses owes 25% of $3,000 rather than tax on the $800 net.

The fix is Form NR6. You file it with the CRA before the rental year begins, requesting that withholding be calculated on net rental income. You then file a Canadian return under Section 216 of the Income Tax Act, reporting rent minus eligible expenses and paying tax at progressive rates.12Canada Revenue Agency (CRA). Filing and Reporting Requirements – Rental Income and Non-Resident Tax The result is almost always a lower bill and often a refund of amounts already withheld.

Selling Later: Withholding and Capital Gains

When a non-resident sells Canadian property, the buyer is legally required to withhold 35% of the gross sale price and remit it to the CRA unless the seller has obtained a certificate of compliance beforehand.13Canada Revenue Agency (CRA). Disposing of or Acquiring Certain Canadian Property On an $800,000 sale, that’s $280,000 held back before you see any proceeds.

To avoid tying up that much cash, apply for a Section 116 Certificate of Compliance from the CRA before closing. The application requires payment or acceptable security equal to 25% of your estimated capital gain (sale price minus purchase price). Once the certificate issues, the buyer no longer has to withhold from gross proceeds.14Canada Revenue Agency (CRA). Procedures Concerning the Disposition of Taxable Canadian Property by Non-Residents of Canada – Section 116 The CRA recommends submitting at least 30 days before the sale date, and processing can run longer than that in practice.

Canada also changed its capital gains inclusion rate effective January 1, 2026. Where 50% of any capital gain used to be taxable, gains above $250,000 realized by an individual in a single year now have two-thirds included in taxable income.15Canada.ca. Government of Canada Announces Deferral in Implementation of Change to Capital Gains Inclusion Rate For non-resident sellers of appreciated Canadian real estate, that means a larger Canadian tax bill on large gains than in prior years.

What the IRS Wants to Know

Canadian property ownership creates U.S. reporting duties even when you owe no additional U.S. tax. The Canadian bank account you opened for mortgage payments counts as a foreign financial account. If the combined value of all your foreign accounts exceeds $10,000 at any point during the year, you must file FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (FBAR). The deadline is April 15 with an automatic extension to October 15.16Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) Non-willful penalties are adjusted annually for inflation and can reach tens of thousands of dollars per account per year. Willful violations can rise to criminal liability.

Separately, if your specified foreign financial assets exceed certain thresholds, you attach IRS Form 8938 to your income tax return. Single filers living in the U.S. hit the threshold at $50,000 at year-end or $75,000 at any time during the year; married-filing-jointly thresholds are $100,000 and $150,000.17Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets An interest in a foreign entity that holds property can pull you into this requirement even when the real estate itself isn’t in a financial account.

On double taxation, the U.S.-Canada tax treaty lets you claim a foreign tax credit on your U.S. return for income taxes paid to Canada on rental income or capital gains, reported on Form 1116.18Internal Revenue Service. United States – Canada Income Tax Convention The credit generally prevents the same income from being taxed twice, but the interplay between Section 216 elections, treaty credits, and FBAR/FATCA reporting is where American owners most often go wrong. A cross-border tax professional, not just a regular CPA, is worth the fee.

Owning a Home Isn’t Immigration Status

Buying property in Canada doesn’t give you residency rights, work authorization, or any easier path to a visa. If you want to spend extended time at your Canadian home, you still have to comply with Canadian immigration rules for visitors, which generally cap stays at six months per visit.