Funding a US Rental Property From Canada: HELOC, Cash and Currency Exchange

Where the money comes from decides two things: whether the lender will accept it and how much of it survives the trip across the border. This post covers the sources Canadians use for a down payment and the cost of turning Canadian dollars into US dollars.

Where the down payment can come from

Savings. The simplest source. The lender wants bank statements showing where it came from, and a large recent deposit will draw questions, so keep a paper trail.

A home equity line of credit. Many Canadians borrow against a Canadian home. A HELOC often has a lower rate than a foreign national loan, and there's no US underwriting for that portion. The catch is that your Canadian home secures an investment in another country, and the line's rate floats. If the US property sits empty for a few months, the HELOC payment comes out of your pocket. In Canada, interest on a HELOC you use to buy a rental is generally deductible if you can trace the money to the purchase, so keep the HELOC separate from personal spending. How the US treats that interest on your 1040-NR is a separate question for your accountant.

Selling an asset. Selling a Canadian investment can fund the purchase, and it may trigger Canadian tax on the gain. Check that first.

A gift from family. Lenders ask for a gift letter and proof of the donor's funds, and the rules differ by loan type.

Registered accounts. An RRSP or TFSA generally can't hold a US rental property directly, and withdrawing from an RRSP counts as income and is taxed. Talk to your accountant before touching either.

Prove the source of funds

Lenders for non-residents check where the down payment and the reserves came from. Expect to provide two to three months of bank statements, an explanation for any large transfer, and for borrowed money, the loan agreement. A document trail now avoids a delay near closing.

Currency exchange costs

Say you're moving C$62,000 to cover US$45,000 at a rate of 1.38. The rate you actually get depends on who does the conversion.

• A retail bank wire often adds 2% to 3% on top of the mid-market rate. On US$45,000, that's roughly US$900 to US$1,350.
• A currency broker or transfer service typically charges a small fraction of that and may give you a better rate for larger amounts.
• Norbert's Gambit means buying a dual-listed security in Canadian dollars, asking your broker to journal it to the US dollar side, and selling it in US dollars. Commissions can be low, but it takes a few days, needs a brokerage account that supports it, and carries a small price risk while it settles.

Get quotes from a few providers on the day you plan to send the money, and ask about limits, since a large transfer may need extra paperwork.

A USD account for the life of the property

Open a USD account early. Rent comes in as US dollars and so do the mortgage, taxes, insurance and repairs. Keep them in US dollars and convert only the profit you want to bring home, at a time you choose. That avoids a conversion fee on every payment.

Exchange rate risk

If the Canadian dollar rises, your US equity is worth fewer Canadian dollars when you convert it back. The US mortgage moves with the property, which softens the effect without removing it. Most investors plan for a range of rates and don't try to guess the direction.

Put the pieces together

A cash-on-cash return in US dollars can look quite different once you add conversion costs, a HELOC's interest and an accountant's fee. Run it with the calculator using your actual down payment and rate, then subtract those extras.

The step-by-step buying guide shows where funding fits in the sequence, and the Canadian checklist covers the USD account and the lender questions.