You’ve decided to purchase property in the U.S. What next? Unless you’ve saved up enough to pay cash, your first step is to arrange financing. 

And despite all the news about the U.S. mortgage meltdown, it’s still possible to arrange a secure mortgage on a U.S. property. 

Although most Canadian banking institutions don’t lend money to private investors wanting to buy U.S. real estate, they likely have a U.S. banking affiliate that does. BMO Bank of Montreal, for example, directs clients to its U.S. subsidiary, the Harris Bank, which based in Chicago. 

The process for Canadians to obtain a mortgage on a U.S. property is quite simple, says William Mies, district sales manager of mortgage sales for Harris Bank. Your application can actually be done over the phone through the bank’s team of mortgage specialists who will request the following:

•your credit report
•your income and assets 
•your employment history 
•two years of T1/T4 tax forms 
•two months of bank statements 
•a current mortgage statement (if you have a mortgage) 
•a signed purchase contract (if you’ve made the purchase)

According to Mies, you should expect to pay a minimum down payment of 20 per cent of the purchase price for a home that’s to be occupied as a second home, and 30 per cent for a home that’s to be used as rental property. He also says that you will likely be charged a .25 percent premium over the prevailing U.S. rate for the same mortgage product.

For example, if a mortgage is offered to U.S. citizens at 5.875 percent, Canadian citizens can obtain the same product at an interest rate of 6.125 per cent. Harris Bank provides only adjustable-rate mortgages to Canadians, but these mortgages do provide an initial fixed-rate period of either one, three, five or seven years.

Mies advises potential borrowers to carefully assess their short and long-term financial goals, as well as their payment and equity objectives before choosing a particular loan. “While longer terms traditionally carry a slightly higher interest rate, the difference at the moment is negligible,” he notes. “And longer fixed-rate terms are always the safer way to proceed for security.”

-The Toronto Star (September 27, 2008)

Learn more about Harris Bank Mortgages