As Pandemic Puts Winter Escape Plans in Jeopardy, Snowbirds With U.S. Homes Ponder Their Options


With the pandemic putting winter plans on hold, many Canadian snowbirds are wondering whether it's time to sell their U.S. vacation homes. Photo: aceshot / iStock / Getty Images Plus

It’s that time of year when Canadian snowbirds begin to put the wheels in motion for their annual winter pilgrimage to the U.S. sunbelt.

But with land border closures still in effect (at least until Oct. 24), the ongoing threat of COVID still worrisomely high in many U.S. states and the uncertainty concerning health insurance, this winter will look and feel very different.

With so many questions and too few answers, snowbirds are in a quandary. Do they go to their beloved winter getaway as they’ve been doing for so many seasons? Or do they sit this year out at home and return next year when the pandemic (hopefully) passes.

As a result, many vacationers have already made up their minds — they’re staying put this year in order to avoid the chaos of last March, which saw thousands of snowbirds abandon their winter homes in the U.S. and hurry home to Canada.


Snowbirds Assess Their Options


However, Alain Forget, a Canadian ex-pat who is head of sales and business development for RBC Bank, says many snowbirds are keeping their options open and adopting a “wait and see” attitude.

These hardy sun-seekers are remaining “on the sidelines,” says Forget. They’re biding their time in order to properly assess border issues and the threat of COVID-19 in the U.S. before deciding when they’ll depart and for how long they’ll stay.

“Instead of coming in November and staying the entire winter, some are looking to come in January or February,” says Forget. “But others are concerned about paying the costs that go with owning U.S. real estate (insurance, management fees, property tax) without being able to use it.”

Canadians have a massive presence in the U.S. real estate market, the majority owning vacation homes and condos located in the so-called Sunbelt. According to the National Association of Realtors, in 2019 Canadians purchased close to $10 billion worth of homes and condos in the U.S., with warm weather destinations like Florida, California and Arizona leading the way. In Florida alone, where Forget is based, Canadians own about $16 billion worth of property, the majority of which are mortgage-free.

But because of the pandemic and the uncertainty about how long it will last – and ultimately, whether life will ever return to normal – some are now considering that it may be time to sell their properties.

“The decision to sell is obviously emotionally and financially driven,” says Forget, saying it’s understandable that people aren’t exactly thrilled about paying expensive costs for something they can’t enjoy.

But he thinks that selling hastily might be a decision they come to regret. First off, they will no longer have winter getaway when the pandemic passes, sacrificing a lifestyle they’ve grown to cherish. Plus, they’ll have to deal with a number of tax issues that a sale of U.S. real estate will trigger.


Unlocking U.S. Equity


To avoid sacrificing their dream vacation home and taking on a host of tax complications, Forget suggests a third option to bridge to better days: snowbirds can unlock the equity they have on their U.S. homes.

Forget says because many snowbirds own their homes outright — and the values of their homes have appreciated over the years — they may not realize they have access to a huge amount of home equity. And better yet, this equity comes in U.S. dollars, which has performed very well recently against its Canadian counterpart. (At press time, 1 USD was worth 1.32 CAD.)

By applying for a U.S. equity home line of credit or simply refinancing their mortgage, people can free up cash and pay the management fees, property tax and insurance on their U.S. homes. Or they can bring the money back to Canada to use for their own purposes. Even better, you’re able to move the cash to your home account without incurring taxes. And you can carry out the transaction through online banking, without leaving the country.

Forget notes that, with low interest rates and a strong U.S. dollar, many Canadians are opting to dip into their U.S. credit. They’re motivated by taking advantage of the value of their property to borrow money at a favourable interest rate and bringing the money back to Canada with a 30-plus per cent bump on the exchange.

“And when they do decide to sell the property down the road, they can pay off any outstanding balance they owe,” he says. Couple this with the fact that with Florida real estate continuing to hold its own, even during the pandemic, there’s a good chance that vacation homes will appreciate in value.

While most Canadian banks that deal with U.S. mortgages will facilitate the home equity line of credit or mortgage re-financing, those considering this option should speak to their financial planner before making their decision.