Canadians exchanging their money into U.S. dollars are at a decided disadvantage, but an RBC Bank financing plan will alleviate that problem for Canadians looking for investment properties and second homes south of the border.
At the current exchange rate, should a Canadian buy a $400,000 (USD) property in Florida’s white-hot, yet affordable, real estate market in cash, they will end up paying $528,000 (CAD). However, using RBC Bank’s real estate lending solution, they’d only need to put down $90,000 (USD), which is the 20% down payment, and have to pay $118,800 at closing. If it’s an investment property, they will put 25% down.
Using a 30-year amortization on a five-year term at 3.75%, diligent investors can hedge their bets on the Canadian and American dollars returning to parity, and considering that the RBC Bank financing plan doesn’t have a prepayment penalty, they can easily repay the loan.
“If they finance 80% of the U.S. mortgage, they don’t have to exchange the full amount and they can save $100,000 (CAD) on a $400,000 (USD) purchase,” said Alain Forget, RBC Bank’s director of business development in the U.S. “There’s no prepayment penalty during the term of the loan, so they can repay it at any time, and it gives them the full flexibility of using some leverage and financing for their investment.”
According to Forget, an existing Canadian property can also be used to cover the cost of the U.S. property: “That’s where the down payment of 20% for a second home, or 25% for an investment property, could come from a home equity line of credit in Canada, so they can technically leverage the entire purchase price of their property with two different loans in Canada and the U.S., but also get the benefit of saving money from the exchange by using U.S. financing.”
The RBC Bank financing solution is a nifty way for Canadian end users and investors to buy into hot American markets in Arizona and Florida. In Scottsdale, for example, a condo can be had for as little as $150,000, which can then be rented out seasonally or long-term. While the currency exchange may seem prohibitive, RBC Bank’s real estate lending solution, in fact, makes investing in the United States as easy as investing domestically in Canada.
“Orlando is a year-round market for short-term rentals, while southeast Florida is more seasonal,” said Forget, “meaning it’s a good market if they want to rent all year long, but also if they want to use it personally, too.”
Forget also recommends seeking professional advice for legal, tax and estate issues that sometimes pertain to Canadians owning U.S. real estate.
Canadians interested in purchasing U.S. property can get prequalified in up to two days by filling out five questions online.
to offset the cost of U.S. home ownership and RBC Bank’s real estate lending solutions.
Neil Sharma is the Editor-In-Chief of Canadian Real Estate Wealth and Real Estate Professional. As a journalist, he has covered Canada’s housing market for the Toronto Star, Toronto Sun, National Post, and other publications, specializing in everything from market trends to mortgage and investment advice. He can be reached at neil@crewmedia.ca.
