What Canadian Buyers Need To Know About Buying In Hawaii
Here are a few specific considerations for Canadian buyers. This information is for general purposes only and is not intended to be a complete list of all things you might need to know.
Title and Escrow
Title and Escrow may be different from the process used to in Canada. In Hawaii we use title companies and escrow officers to handle the transfer of the property, including the deed. The escrow officer, in addition to your Realtor, will communicate with you regarding issues of title, signatures, inspection time lines or other issues dealing with ownership and title.
This process can take 45-60 days (or longer) to complete if the purchase is being financed. Cash transactions can be completed in 30 days.
There are a variety of fees and taxes that are customary in the US that you may not be used to and are in addition to the purchase price. These may include:
Mortgage Rules are different in the US, where you can finance up to 30 years
Lenders must be licensed in Hawaii, so you can’t use a Canadian lender to finance a Hawaii However, you can get a loan such as a second mortgage on your home in Canada and use the money from that loan to make a cash purchase in Hawaii.
Having established good US credit could make the lending process go more smoothly.
Canadians typically need at least 30% down to get a loan.
Canadians also typically pay ½ to ¾% higher loan rate than standard domestic buyers.
Before making an offer on a property, it’s important to get prequalified by a Hawaii lender and gather the financial documents that will be required for the loan application, including pay stubs, tax returns, proof of available cash for down payment, etc.
Non-US citizens are subject to FIRPTA (Foreign Investment in Real Property Tax Act of The act requires that 10-15% of the sale price is withheld from the seller’s proceeds at close of escrow to ensure US taxes on the gain are paid. Once a U.S. tax return is filed, any overpayment is returned.
HARPTA (Hawaii Real Property Tax Law) requires that 5% of the sale price be withheld at closing. Once a Hawaii tax return is filed, any overpayment is
There is 30% withholding on rental income to assure that US taxes are paid (if the Canadian owner doesn’t have a TIN – Taxpayer Identification Number).
All foreign investors will need a TIN number in the If they are not renting their property they may not need this immediately, however it will be required when they sell or rent the property. It is recommended that Canadians get the TIN at the time of purchase.
Also, as it true of US buyers, if a property will be rented to tenants or guests, the property owner needs to have a business license for collecting GET (General Excise Tax) and TAT (Transient Accommodations Tax). You will need to file regular returns to submit the taxes
Real estate property taxes vary depending on how the property is being held. A link to current Kauai county tax rates https://www.kauai.gov/Government/Departments-Agencies/Finance/Real-Property/Tax-Rates
Do consult your tax attorney regarding additional tax considerations, including estate taxes.
Some documents will have to be notarized by a US notary. The instructions will likely direct you to do the signing at the US Embassy. That will likely require scheduling an appointment and can be time consuming. You should try to schedule this appointment two weeks in advance. It may be simpler to make the drive across the border to a notary in the US.
If the utilities are to be in the name of the new foreign owner, utilities may at least require notarized ID’s in order to open an account. There are no mainland banks on Kauai – only local Hawaii-based banks. (No Wells Fargo, Bank of America branches exist in Hawaii.) If you plan to have rental expenses such as electricity paid out of a Hawaii account or rental revenues deposited into a Hawaii account, you will need to open a local bank account.