What special considerations need to be made for a US citizen who wishes to purchase a house in Canada?
"About deducting mortgage interest: No, you can not deduct it unless it is qualified mortgage interest. ""Qualified mortgage interest is interest and points you pay on a loan secured by your main home or a second home."" (Tax Topic 505).  According to the IRS, ""if you rent out the residence, you must use it for more than 14 days or more than 10% of the number of days you rent it out, whichever is longer.""  Regarding being taxed on income received from the property, if you claim the foreign tax credit you will not be double taxed. According to the IRS, ""The foreign tax credit intends to reduce the double tax burden that would otherwise arise when foreign source income is taxed by both the United States and the foreign country from which the income is derived.""  (from IRS Topic 856 - Foreign Tax Credit)   About property taxes: From my understanding, these cannot be claimed for the foreign tax credit but can be deducted as business expenses. There are various exceptions and stipulations based on your circumstance, so you need to read the official publications and get professional tax advice. Here's an excerpt from Publication 856 - Foreign Tax Credit for Individuals: ""In most  cases,  only  foreign  income  taxes  qualify for the foreign tax credit. Other taxes, such as foreign real and personal property taxes, do not qualify.  But  you  may  be  able  to  deduct  these other  taxes  even  if  you  claim  the  foreign  tax credit for foreign income taxes. In most cases, you can deduct these other taxes  only  if  they  are  expenses incurred  in  a trade  or  business  or  in  the  production  of  in­come.  However,  you  can  deduct  foreign  real property taxes that are not trade or business ex­penses  as  an  itemized  deduction  on  Sched­ule A (Form 1040)."" Note and disclaimer:  Sources: IRS Tax Topic 505 Interest Expense, IRS Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses) , IRS Topic 514 Foreign Tax Credit , and Publication 856 Foreign Tax Credit for Individuals"
"The first red-flag here is that an appraisal was not performed on an as-is basis - and if it could not be done, you should be told why. Getting an appraisal on an after-improvement basis only makes sense if you are proposing to perform such improvements and want that factored in as a basis of the loan. It seems very bizarre to me that a mortgage lender would do this without any explanation at all. The only way this makes sense is if the lender is only offering you a loan with specific underwriting guidelines on house quality (common with for instance VA-loans and how they require the roof be of a certain maximum age - among dozens of other requirements, and many loan products have their own standards). This should have been disclosed to you during the process, but one can certainly never assume anyone will do their job properly - or it may have only mentioned in some small print as part of pounds of paper products you may have been offered or made to sign already. The bank criteria is ""reasonable"" to the extent that generally mortgage companies are allowed to set underwriting criteria about the current condition of the house. It doesn't need to be reasonable to you personally, or any of us - it's to protect lender profits by aiding their risk models. Your plans and preferences don't even factor in to their guidelines. Not all criteria are on a a sliding scale, so it doesn't necessarily matter how well you meet their other standards. You are of course correct that paying for thousands of dollars in improvements on a house you don't own is lunacy, and the fact that this was suggested may on it's own suggest you should cut your losses now and seek out a different lender.  Given the lender being uncooperative, the only reason to stick with it seems to be the sunk cost of the appraisal you've already paid for. I'd suggest you specifically ask them why they did not perform an as-is appraisal, and listen to the answer (if you can get one). You can try to contact the appraiser directly as well with this question, and ask if you can have the appraisal strictly as-is without having a new appraisal. They might be helpful, they might not. As for taking the appraisal with you to a new bank, you might be able to do this - or you might not. It is strictly up to each lender to set criteria for appraisals they accept, but I've certainly known of people re-using an appraisal done sufficiently recently in this way. It's a possibility that you will need to write off the $800 as an ""education expense"", but it's certainly worth trying to see if you can salvage it and take it with you - you'll just have to ask each potential lender, as I've heard it go both ways. It's not a crazy or super-rare request - lenders backing out based on appraisal results should be absolutely normal to anyone in the finance business. To do this, you can just state plainly the situation. You paid for an appraisal and the previous lender fell through, and so you would like to know if they would be able to accept that and provide you with a loan without having to buy a whole new appraisal. This would also be a good time to talk about condition requirements, in that you want a loan on an as-is basic for a house that is inhabitable but needs cosmetic repair, and you plan to do this in cash on your own time after the purchase closes. Some lenders will be happy to do this at below 75%-80% LTV, and some absolutely do not want to make this type of loan because the house isn't in perfect condition and that's just what their lending criteria is right now.  Based on description alone, I don't think you really should need to go into alternate plans like buy cash and then get a home equity loan to get cash out, special rehab packages, etc. So I'd encourage you to try a more straight-forward option of a different lender, as well as trying to get a straight answer on their odd choice of appraisal order that you paid for, before trying anything more exotic or totally changing your purchase/finance plans." Sorry, I don't think a bounty is the issue here. You seem to understand LTV means the bank you are talking to will lend you 60% of the value of the home you wish to purchase. You can't take the dollars calculated and simply buy a smaller house.  To keep the numbers simple, you can get a $600K mortgage on a $1M house. That's it. You can get a $540K mortgage on a $900K house, etc.  Now, 60% LTV is pretty low. It might be what I'd expect for rental property or for someone with bad or very young credit history. The question and path you're on need to change. You should understand that the 'normal' LTV is 80%, and for extra cost, in the form of PMI (Private Mortgage Insurance) you can even go higher. As an agent, I just sold a home to a buyer who paid 3% down.  The way you originally asked the question has a simple answer. You can't do what you're asking. "Before going into specific investments, I think it would be a good idea to assess how ""free"" is that $5000. How much do you have to rely on it in emergency? You always want to buy low and sell high. However, if you need to make unplanned withdraw from an investment, you risk unfavorable market conditions at the time when you need the money, and lose money that way. One common suggestion is to keep 3-6 months living expense in checking/saving/very, very liquid/short term investments. After that, you can invest the rest in more profitable ventures.  Assuming that you are all set in that regard, next consideration is whether you have any goal for the money besides generating the maximum return. Is this for retirement, buying a house/apartment a few year down the road, graduate school, emergency cash store for the time between graduation and getting a job, or traveling a year in Europe after graduation? There are myriad of other possible goals. Knowing that you get a better idea of the time frame involved in the investment, and what you need to do with your money. If this is for retirement, you just need to generate the highest possible return for 40-50 years, while minimize taxes when you have to withdraw that money (there are more nuanced concerns, but large idea-wise that's what you need to do). If you want it for a trip to an exotic location in 2 year, then your primary goal will be to preserve the value of your capital, while assessing whether you need to manage foreign-exchange risk.  The time frame also rule in or rule out certain types of investments. If you are planning to use the money to purchase a house in 5 years, IRAs probably would not be what you are looking for. If you are planning to retirement, short term CD would not be the most effective way. After figuring out a bit of what you are trying to do with the money, I think how you want to invest it will be much more clear to you. In case of retirement, people seem to generally recommend no load index funds, and mid-cap growth funds. Nothing is really off the table, since your investment time frame is so long, and you can tolerate risk. You might also be interested to check out https://www.wealthfront.com/ (I have no relation with them). A friend recommended it to me, and I think their pitch make sense.  In other cases, it really is case dependent, and there might have more than one solution to any case. There is just one more potential investment venture that people you might not immediately thinking of, and that might be of interest to you. That is to use the $5000 as your own budget to build/maintain connections with people and network. Use it to take professors out to a meal to pick their brain, travel to keep in touch with old friends, network with potential future employers and peers to improve job prospect, or get opportunities to meet interesting people.  I hope this helps." "As user quid states in his answer, all you need to do is open an account with a stock broker in order to gain access to the world's stock markets.  If you are currently banking with one of the six big bank, then they will offer stockbroking services.  You can shop around for the best commission rates.  If you wish to manage your own investments, then you will open a ""self-directed"" account.  You can shelter your investments from all taxation by opening a TFSA account with your stock broker.  Currently, you can add $5,500 per year to your TFSA.  Unused allowances from previous years can still be used.  Thus, if you have not yet made any TFSA contributions, you can add upto $46,500 to your TFSA and enjoy the benefits of tax free investing. Investing in what you are calling ""unmanaged index funds"" means investing in ETFs (Exchange Traded Funds). Once you have opened your account you can invest in any ETFs traded on the stock markets accessible through your stock broker. Buying shares on foreign markets may carry higher commission rates, but for the US markets commissions are generally the same as they are for Canadian markets.  However, in the case of buying foreign shares you will carry the extra cost and risk of selling Canadian dollars and buying foreign currency.  There are also issues to do with foreign withholding taxes when you trade foreign shares directly.   In the case of the US, you will also need to register with the US tax authorities.  Foreign withholding taxes payable are generally treated as a tax credit with respect to Canadian taxation, so you will not be double taxed. In today's market, for most investors there is generally no need to invest directly in foreign market indices since you can do so indirectly on the Toronto stock market.  The large Canadian ETF providers offer a wide range of US, European, Asian, and Global ETFs as well as Canadian ETFs.  For example, you can track all of the major US indices by trading in Toronto in Canadian dollars.  The S&P500, the Dow Jones, and the NASDAQ100 are offered in both ""currency hedged"" and ""unhedged"" forms.  In addition, there are ETFs on the total US Market, US Small Caps, US sectors such as banks, and more exotic ETFs such as those offering ""covered call"" strategies and ""put write"" strategies. Here is a link to the BMO ETF website. Here is a link to the iShares (Canada) ETF website." "To add to MrChrister's answer:  Canada also has a Consumer Price Index (CPI) used to measure inflation that is distinct and separate from that maintained by the United States. There are differences in inflation between the U.S. and Canada because our currencies are different, and there may be different items in the ""basket"" of goods that constitutes the index. You can find current information on the Canadian CPI at Statistics Canada, here: Latest release from the Consumer Price Index. Also, the Bank of Canada – our central bank – maintains a free online Inflation Calculator.  The BoC's inflation calculator is handy because you can enter a dollar amount for a past date and it will figure out what that would be in today's dollars.  For instance, $100 in 1970 dollars had the same purchasing power (under the CPI) as $561.76 in 2009 dollars! And you're right – if you get a salary increase that is less than the rate of inflation, then in theory you have lost purchasing power.  So, anybody really looking for a raise ought to make an effort to get more than the increase in CPI.  Of course, some employers are counting on you not knowing that, because any increase that's less than CPI is effectively a salary decrease; which could mean more profit for them, if they are able to increase their prices / revenues at inflation or better. Finally, consider that salary & wage increases also contribute to inflation!  Perhaps you've heard of the wage/price inflation spiral.  If you haven't, there's more on that here and here." My wife and I are both Canadian citizens living in the US with green card status.  I still have a Canadian RRSP and bank account in Canada that are dormant for the most part.  We use the Canadian debit card only when traveling (which is quite helpful). Neither of us file any paperwork in Canada anymore.  But as others have mentioned, we do file the FBAR form... this takes about 10 minutes and gets mailed somewhere in Michigan if I recall correctly.  (Keep the balance less than $10k total among all foreign accounts and you relieve yourself of this too.) As far as taxes go, we make less interest in our Canadian account than in our US accounts, so the tax burden is less. You are planning on signing a contract for, likely, hundreds of thousands of dollars, and plan on paying, likely, tens of thousands of dollars in a deposit. For a house that is not built yet. This isn't particularly unusual, lots of people do this. But, you need a lawyer. Now, before you sign anything. Your agent may be able to recommend a lawyer, but beware; your agent may have a conflict of interest here. Most of the years I filed while a non-resident of the US, I didn't owe a dime to the US government. Same was actually true for Canada, though I did have some income there that was eligible for taxation. AFAIK, even if I hadn't, I would have been required to file, but perhaps that isn't necessary for everyone.