Weak Canadian Loonie Impacting U.S. Snowbird Home Buying

Weak Canadian Loonie Impacting U.S. Snowbird Home Buying

Residential News » Vancouver Edition | By WPJ Staff | March 29, 2016 8:00 AM ET

Canadians Buyers Feeling Effects of Loonie 13-Year Low Against U.S. Dollar
Spending time in the U.S. costs Canadians more these days with the value of the Canadian dollar hitting a 13-year low. Cross-border travelers and snowbirds face higher expenses for everything from groceries to rent due to an unfavorable exchange rate.
To illustrate this point, Alain Forget, director of business development at RBC Bank tell the World Property Journal, "When buying a $200,000 home in all cash, with the current exchange rate, Canadians will end up spending an extra $66,000".
However, RBC Bank - the leading provider of banking solutions for Canadians visiting or staying longer-term in the United States has published a few expert tips to help Canadians make the most of their money.
Here are a few tips for Canadian snowbirds offered by RBC Bank:
  • Make Sure You Get the Best Exchange Rate: Instead of exchanging money several times throughout your visit to the U.S., exchange your money in one lump sum. The more money you exchange, the lower the exchange rate you will generally pay.
  • Refinance your home and take advantage of the strong U.S. dollar: Many Canadians bought their U.S. home between 2009 and 2013 when the Canadian dollar (CAD) was at or around parity with the U.S. dollar (USD). Over the years, these same homes have appreciated. Canadians who are U.S. homeowners in popular snowbird markets are in a unique and favorable position to take advantage of their property's appreciation and the strong U.S. dollar. By refinancing, Canadians can take the surplus earned on the currency exchange, and use it to repay debts or make new investments back in Canada. If the money is kept in USD, they can spend it on renovations to their U.S. home or put it in a high-interest savings account in the U.S. where it will earn more than in Canada and remain FDIC-insured.
  • Buy, Don't Rent: Peak season rent is expensive in popular snowbird hotspots, but property values are still affordable- particularly compared to similar housing in Canada. For example, renting a condo in Phoenix might cost $3,000 in monthly rent during peak season. However, the monthly mortgage payment to purchase the same property would be only $900. Plus, while rent payments continue to climb each year, monthly mortgage payments stay consistent. And, renting the property while not using it provides a way for Canadians to cover their mortgage, homeowners' association fees and property tax.
  • Finance Your U.S. Property: Consider a U.S. mortgage instead of buying your home with all-cash. By applying for an adjustable rate mortgage with a fixed term, Canadians can avoid the one-time cost of currency exchange in a large amount now and potentially pay off their mortgage without any prepayment penalties if the Canadian dollar improves.
  • Save money on U.S. Purchases with a U.S. Credit Card:  With a U.S. credit card, Canadians can save foreign transaction fees on purchases made in the U.S.  Plus, valuable benefits such as travel insurance are available on some Canadian cards, providing important protection at no cost.

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