Life Beneath The Palms – Jumping Hurdles to Buy Florida Property

Scratch a Canadian in the middle of a winter storm and, chances are, he or she will sigh for a place in the sun, often the Florida sun. We’ll gladly trade snow for rain and blizzards for hurricanes. And for those who want to go often or extend their stays, it’s possible to buy a home. Florida realtors report strong interest from Canadians in buying Florida property. “Last year, five out of six of my clients were from Canada,” says Bill Eckler, a realtor with Michael Saunders & Company in Venice, Florida.

Driving our shivering masses to Florida’s sandy beaches and tanning oil huts are interest rates that are still low by historical standards, an abundance of foreclosed properties available at very attractive prices, and, of late, a loonie that flirts with parity with the greenback. Cheap loans, cheap houses and a powerful currency. It seldom gets better than that. However, for foreigners, buying Florida houses or condos is not necessarily a snap. Without sufficient cash to make a purchase outright, a loan is needed. But to wheedle a loan from a local lender can be easier said than done.

At one credit union in south Florida, the answer to making loans to residents of Canada is a straightforward “no.”

“You have to be a member of our credit union. To do that, you have to be a resident of our county,” a loans officer explains at Achieve Credit Union in the inland town ofLargo, not far from St. Petersburg on the state’s west coast. Of course, you can’t be a resident without a home address, so this is the Catch 22 of the game. But there are solutions.

Folks from Canada who arrive either with sufficient cash to purchase or a line of credit arranged in Canada have no problem buying, Mr. Eckler notes. “I tell our foreign buyers that going to their local bank in Canada is easier than going through one of our lenders,” he explains. “The problem with borrowing in the U.S. is that we have a small number of banks that are loaning to foreign nationals.”

Even when they do make loans to foreigners, Florida banks charge extra for what they perceive as increased risk. “The lenders will go up to 70% of value if you have a very good credit score, an international credit report, want between $100,000 and $1.25 million and can put 30% down,” Mr. Eckler explains.

Getting a loan to buy a vacation home in Florida is easy for potential buyers who deal with a Canadian bank that has a presence in the state. Royal Bank, for example, has 83 branches across Florida stretching from just north of Miami to the Panhandle. At any of those branches a client with an established RBC relationship in Canada would be well received, says Derek Serra, Regional Manager for Mortgages for Royal Bank in Toronto. “They treat you like an existing customer.”

“If our clients have an RBC Homeline Plan, which offers a combination of options for lines of credit and mortgages for buying residential real estate, they can get fixed or variable rate plans, as they would in Canada,” Mr. Serra notes. “The Homeline plan is a loan secured against the Canadian property. We could do a loan at the same rates they can get in Canada. If the client has sufficient equity in his Canadian property, he or she could leverage it to buy the Florida property. There would be no property appraisal in Florida, because from our point of view, it would be the customer just deciding what to do with the money available in the credit line.

In operation, RBC allows a customer to borrow up to 80% of the value of the property that is serving as collateral, Mr. Serra says. At present, Homeline loans are at prime plus 50 basis points or 2.75% in total, subject to change at any time, he adds.

RBC also makes conventional mortgage loans in Florida with rates competitive with those in Canada, notes Alain Forget, Director of Cross Border Strategy for RBC Bank in the United States.

Other chartered banks have competitive programs. For example, the BMO Financial Group operates a U.S. subsidiary through its wholly owned Chicago bank, Harris, which offers a program called Canadian Gateway.

It provides loans for residential properties in amounts up to $2 million through Harris branches, essentially providing a Canadian mortgage program for American property. Conventional loans provide fixed and variable rate mortgages, says Paul Gammal, a spokesperson for BMO in Toronto. “Very few U.S. lenders offer this type of Canadian mortgage program,” he says. “It’s a product for Canadian customers of BMO or Harris looking for a residence in the United States.”

TD Bank NA also operates a network of banks in the U.S. and makes mortgage loans at competitive rates available through a network of branches in Florida. “We’d underwrite any mortgage application for a property in Florida based on an established relationship in Canada,” says a TD loan officer at the bank’s mortgage centre in Mt. Laurel, New Jersey. TD offers to give decisions on mortgage applications in just one day or to provide a $500 payment. However, says, the banker, “it’s not often that we have to do that.”

There could be a financial reward for going through the hurdles of buying a Florida home. “Prices remain down from their peak by as much as 60%,” Mr. Forget says. “That’s a bargain for people who want sunshine and a potential profit.”

Written by Andrew Allentuck