Relocating northward may send finances south

Dear Steve,
We are contemplating relocation to Canada from the U.S. My husband's company will pay for the realty fees to sell our home here and the closing costs to buy a home in Canada. We only expect to be in Canada for three years but perhaps as much as five years. Should we buy a home there or just rent? We are not sure which would make more sense financially.
-- Tiffany

Unlike in the United States, homeowners in Canada may not deduct their mortgage interest payments from their taxable income -- which can be an unpleasant surprise to unsuspecting American transplants at tax time.

Terms of mortgages are also structured differently.

Many Canadian mortgage holders must renegotiate the terms of their mortgage several times during their amortization period, whereas the payments and interest rates are most often fixed during this period in the United States. This may not be much of an issue for you if you'll only be there for three to five years.

But that short-term stint might also work against you.

People who sell after living in a place for a relatively short time often take a loss or diminished gain as a result of front-loaded home-buying expenses such as fees, agent commissions and closing costs.

However, you won't be feeling the bite from the latter thanks to your hubby's company, which does help skew the equation a little bit more toward buying.

But also be aware of the Canadian Land-Transfer Tax, which varies from province to province. It is generally computed as a percentage of your purchase price. That, as they say, could leave a mark.

All told, it's not likely those added expenses would be equivalent to the money you'd throw away by renting three to five years. But if your husband's company suddenly falters or cuts back staff, you could both be stuck in the Great White North with no income, a big mortgage payment and a weighty heating bill.

If you can get a sizeable rent credit from your husband's company that's roughly equivalent to what it's willing to give you for closing costs at purchase, you might have more peace of mind deciding to rent.

During that rental time, you could also get a clearer picture of your market and perhaps better determine where you two fit into it.

If you are determined to buy, I'd strongly recommend hiring a Canadian real estate lawyer (or a "notary" as they're called in the Province of Quebec) to walk you through provincial home-buying subtleties.

Check out Bankrate's Canada Web site for more information about real estate in that country. It might also be wise to go to the Canadian Real Estate Association Web site for the latest housing price averages in the market you're targeting. They vary widely. For example, the Montreal average of $197,296 as of October 2004 is dwarfed by the average home price in Vancouver of $407,166.

Additionally, the Canadian Land Centre offers a free online "Newcomer's Guide to Canadian Housing." You might also check out CanadaUSemployment.com for work-visa issues and RelocateCanada.com for additional relocation nuances.

Good luck, eh!