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Kevin Depocas Dumas says even with current U.S.-Canada tensions he’s not seeing a lot of Canadians who want to sell their Florida properties.
In the latest episode of Two Way Traffic, he and host Darren Coleman discussed issues affecting Canadians who own property in the state. About half a million Canadians are in that boat.
Dumas is Associate Vice President of Business Development of NatBank, a wholly owned subsidiary of the National Bank of Canada that’s operated in Florida for over 30 years.
Topics he and Coleman discussed include:
- Difficulties Canadians in the U.S. have in getting a mortgage from an American bank and what to do about it.
- Problems Canadians in the U.S. – even wealthy ones – have in obtaining credit or getting a loan.
- Why it’s cheaper to deal with an American financial institution than a Canadian one when in the U.S., but there could be issues you may not anticipate.
Link to podcast …
https://twowaytraffic.transistor.fm/episodes/canadians-say-they-will-stay-in-fla
Darren Coleman
Today I’m joined by Kevin Dupocas Dumas, AVP of NAT Bank in Florida. So you guys have offices in Naples. Where else?
Kevin Depocas Dumas
We have three other branches on the east coast of Florida. One in Hollywood. One in Pompano Beach. And one in Boynton Beach.
Darren Coleman
This conversation is going to be helpful for Canadians who have or want to have property in Florida. So let’s guide people through this. Who is NAT Bank?
Kevin Depocas Dumas
NAT Bank was created 30 years ago and we are a wholly owned subsidiary of National Bank of Canada. We’ve been operating here for 30 years offering financing solutions or banking solutions primarily for Canadians. A lot of Canadians may not have access to the financing market or the banking market here. We take care of those needs for them, especially for those who spend half their year in Florida.
Darren Coleman
You and I just happened to meet each other. I was in Naples and you guys were doing a presentation in your branch for your clients. You had a cross-border attorney doing the presentation and it just happened to be my friend Shlomi Levy who’s been on this podcast. I should give full disclosure since I was a vice president at National Bank Financial for five months after they acquired HSBC. So what are some of the challenges if Canadians have property or wish to buy property in the U.S.? How easy is it to go into a U.S. bank and say I’d like a mortgage on my condo? Or a mortgage on my property? How easy is it to get a U.S.-domiciled mortgage?
Kevin Depocas Dumas
This is actually the biggest problem for Canadians coming down here. They cannot use their Canadian credit history or their Canadian assets. They’re not going to be using any documents that come from Canada. So they don’t qualify for a loan, or if they do, they have to go to the private lenders: which usually won’t do a loan at more than 50% LTV. So Canadians are not only faced with the currency exchange, but where are they going to get funds from investments they’re holding and putting it into buying the property? This is the biggest thing they’ll face here.
Darren Coleman
They don’t have what’s called a FICO score. They have a credit bureau in Canada, but they don’t have one on the U.S. side. So the U.S. bankers are like … we know nothing about you. So they have to put a line of credit on their property in Canada and then become a cash buyer in the U.S.. But are there differences between a U.S. mortgage, if they can get one, and a Canadian mortgage for U.S. property? If they go that traditional way and do a line of code on their house in Toronto or Montreal, and then want to buy that property. Is there a benefit with having a U.S.-based mortgage on that property?
Kevin Depocas Dumas
Yes. First off, you can borrow in U.S. funds versus borrowing in Canadian funds. You’re leaving some room in Canada for future borrowings in case you have renovations on your house in Canada and things like that. One of the big advantages with getting a mortgage here in the US is that in the US you’ll have a competitive rate, not based on the same rate as in Canada which are more expensive.
Darren Coleman
In Canada, typically the longest term that you can lock your mortgage rate in is five years. Is that the same in the US?
Kevin Depocas Dumas
We try to offer products similar to the Canadian products. However, one big difference is that with U.S. mortgages people are buying primary or secondary houses here. There is no prepayment penalty when you reimburse the loan in advance. So sometimes it gives more flexibility for Canadians. Now, if we’re into investment mortgages, rentals and things like that, that’s different. And there are penalties.
Darren Coleman
In Canada there’s usually one of two calculations a bank will do if you want to pay your mortgage down sooner. We had clients who suddenly are able to pay off their mortgage. I didn’t realize that with a U.S. mortgage there was no prepayment penalty. That’s extremely helpful.
Kevin Depocas Dumas
The alternative for our customers is to get a mortgage with us and borrow on their property in Canada where they’re around 7 or 7.5 per cent. So you’re paying that rate versus here in the US with a fixed mortgage at 5.625 per cent.
Darren Coleman
That’s significant. What percentage of your staff speak French?
Kevin Depocas Dumas
Around 90% of our staff speaks French.
Darren Coleman
You guys can really help them with a lot of things. You can help them set up a bank account to pay their phone bill and all those other things?
Kevin Depocas Dumas
We offer the full deposit solution and transactional services. If a customer wants to transfer money from Canada, keep some in the U.S., pay their water bills, insurance, taxes. It’s important to have a bank account here as well.
Darren Coleman
One thing we find when clients move to the U.S. is we warn them that setting up banking will be much harder than they think. You might be able to open a bank account, but getting a credit card? We’ve had people who are multi-millionaires who are told they can have a credit card with a $500 limit.
Kevin Depocas Dumas
If you don’t have a U.S. Social Security number it’s hard to get a credit card. But not only that. It’s hard to get a U.S. bank account in the U.S.. Wells Fargo recently shut down its foreigners program. From their perspective 95% of their customers are U.S.-based. So the amount of regulation compliance that goes into that 5% is not worth it for them.
Darren Coleman
When people have a property they need a bank account for day-to-day things. They want a credit card that’s in U.S. dollars, but they also want it in the U.S. so they can make sure they get their cell phone and all the other things in their Netflix account. Are you getting people buying a property for the first time?
Kevin Depocas Dumas
Yes. We handle both purchases and refinance cash out. People who bought the property a long time ago paid it off or never had a mortgage and want to access that equity. We can help. Once the people cash out, they’re free to do what they want with the money. Send it back to Canada. Open a new business.
Darren Coleman
I’m curious if you’re seeing a change in how many clients are coming down. We had Trump’s Liberation Day not long ago. We’ve got people concerned about tariffs and travel. Are you still seeing people coming down and moving to Florida or buying property in Florida?
Kevin Depocas Dumas
It quietened down the past few months, but this is also the end of the season so customers are going back up north. Overall we’re seeing people wanting to come back. We’re not seeing a lot of customers selling their property or just moving back.
Darren Coleman
Do you see a difference in the markets you’re in?
Kevin Depocas Dumas
We opened up in Naples and there’s a lot of activity up in Lee County as well. For Canadians, they’re flying into Fort Myers airport. We also see a lot of customers going to Orlando for investment properties. I would say half of our investment portfolio is located in Orlando. We have one employee per branch and lending officer per branch. We are relatively quick at doing the financings in the US. It’s not a process that takes a few days like we’re accustomed to in Canada where there’s a lot more regulation and it can take 30 or 45 days.
Darren Coleman
But if somebody is looking to buy a property, they need to understand their lead times.
Kevin Depocas Dumas
Exactly. But we have customers buying properties with us for rentals investment primary.
Darren Coleman
We’ve seen people use leverage for estate-planning purposes. Maybe they bought their condo in Florida 20 or 30 years ago. It’s had significant price appreciation. There’s no debt attached to it. But they want to figure out how they’re going to equal the score between a couple of their kids. So maybe one child uses it and they’re going to inherit it and the other one doesn’t. Or they want to be able to do something else. They want to get some of that liquidity or they want to take advantage of the value of this property that’s gone up so much. So using a mortgage on that property allows them to get some flexibility. They can buy a new car, they can give money to their kids, they do whatever they want to do with it.
Kevin Depocas Dumas
That is something we can create for them just like in Canada. But here mortgage interest is tax- deductible on rental properties.
Darren Coleman
And I was going to mention that they are able to do that when they do this refinance, right? This becomes a tax-deductible expense.
Kevin Depocas Dumas
Exactly. It’s also important to know that once you refinance your property, this is not a taxable gain or anything like that. Or if you take the money, send it back to Canada and make some money on the currency exchange, this is not a taxable gain.
Darren Coleman
This is a very powerful financial-planning consideration.
Kevin Depocas Dumas
Sometimes there are fiscal strategies. I don’t want to get too deep into this. But if you’re borrowing here in the U.S. to finance another investment opportunity up in Canada, this becomes tax-deductible, so you can deduct that interest from the income you’re generating on the other investment, as long as those funds are used for that purpose.
Darren Coleman
By the way we’re not giving tax advice. This is just two guys talking, but that might be an idea to run past your accountant. That’s a powerful idea. People can use the tax deductibility of the mortgage on the U.S. where it’s allowed and then as long as you use it for investment purposes in Canada, you’re good. So this is a way to generate liquidity out of an asset.
Kevin Depocas Dumas
It’s also regarding what they call here the deed, so the title of the property with the counties and everything that they won’t do if it’s a foreign company. This becomes a big issue for banks trying to finance from up north. So usually what they do is they’ll tie up some assets that are up in Canada against the loan.
Darren Coleman
That’s a great strategy. How long have you guys been doing this?
Kevin Depocas Dumas
We’ve been running that bank in the U.S. since 1993 … 1994 … and we’ve been offering financing ever since. We saw a big pickup right after the financial crisis but for 30 years we’ve been providing advice for Canadians coming down here. But here in the US it’s different. There’s insurance due to hurricanes. There is a homeowners association. There are prepaid taxes to be paid. It’s also not easy when it’s not in French.
Darren Coleman
In many cases someone is buying a property and they’re used to the Canadian way of doing it but are at a loss because they don’t know the U.S. way of doing it. And if they’re using their Canadian line of credit, the Canadian banker is not going to help them. You guys can help them navigate that complexity. But how do I acquire property in Canada?
Kevin Depocas Dumas
You can use your Canadian funds like you were planning or you can obtain financing. You touched on the exchange rate. Right now it’s not favourable, and selling off investments might not be the right choice for the customer.
Darren Coleman
From our perspective people move for lots of reasons. Sometimes for love, sometimes for family, sometimes for work, sometimes for politics. At the end of the day they do go back and forth. The trick is to know what you’re doing. I’m really delighted to find you guys. For those listening, if you have a property in Florida or you’re looking to get one I’m happy to connect you with Kevin.
