Immigrants will be happy to know that mortgaging a home in Canada may not be as far-fetched as some think. It doesn’t take years and years to build up credit and employment history to be able to purchase property, and at a good rate, too. Many of the big banks offer financing based on ‘new to Canada’ mortgage programs.
There are some rules and restrictions to follow when applying for a mortgage as a newcomer to Canada. But, they are not a major impediment at all. Many Canadian citizens who were born in Canada are faced with similar offers and rules when it comes to financing home purchases. And yet, many Canadians and non-Canadians alike buy homes here, thanks to mortgages.
If you are a newcomer to Canada and are looking for advice on how to finance a home purchase with a ‘new to Canada’ mortgage in British Columbia or Western Canada, we can help.
We are independent mortgage brokers in British Columbia, with our lead mortgage broker being in Richmond.
Independent mortgage brokers shop the financial market to get you the best rates and deals from mortgage lenders, based on your situation. They also advise on what you can afford, or what actions you should take to get approved for a mortgage in Canada.
Best of all: mortgage brokers often work for free for home buyers. This means there is nothing to lose by working with one. They can be a great help to your home-buying process.
If you have recently arrived in Canada and plan to remain here long term, living in a home that you own, we encourage you to get in touch! We can help both permanent residents and those with work permits. In fact, we can also help you buy a home in Canada if you plan to live in it part time, or not at all.
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Below, we answer some questions you may have about ‘new to Canada’ mortgages.
How much of a property down payment do I need, as a newcomer to Canada?
The ‘new to Canada’ mortgage programs require at least 5% – 10% of a property’s purchase price as a down payment. If you can put down 20% or more, your monthly payments and interest rates can be lower.
In many cases, you will also need to purchase mortgage default insurance. You can learn more about this type of insurance, here. This can add approximately 1% – 4% to your loan amount, depending on how much you can put down.Read more
The main determinant for the minimum down payment amount is whether or not you have permanent resident (PR) status in Canada.
Those with a Canadian PR status can put down as little as 5% to qualify for a ‘new to Canada’ mortgage.
Those with a temporary, Canadian work permit can put down as little as 10% to qualify for a ‘new to Canada’ mortgage.
In the above scenarios, the home you purchase can not be worth more than $1M and must be occupied by yourself (i.e. it must be owner-occupied). Actually, 5% down will be required on the first $500K and 10% down will be required for the remainder, to a maximum of $499K. This is federal government policy. You can learn more on the Government of Canada website, here.
If you do not have PR status, the property must contain only 1 unit.
If you do have PR status, you are allowed 1 – 4 units. However, anything above 1 additional unit will increase the minimum down payment requirement (up to 10%). In this case, you must live in one of the units, and you can rent out the others.
If you have PR status and you want to purchase an investment property to rent out (i.e. you will not live in it at all), the minimum down payment will be 20%. In this case, the property can also have 1 – 4 units.
However, if you have PR status and you have good credit, you may be eligible for other mortgage products. These other mortgages may not come with the rules and restrictions noted above.
You will have a maximum of 25 years to repay the bank for the rest of your home’s value. This is called an amortization period. If you can put down 20% or more, you may be eligible for a 30 year amortization period.
Further details should be discussed with your mortgage broker.
How can I increase my chances of being approved for a ‘new to Canada’ mortgage?
Firstly, you should have your PR status or work permit for at least 60 days before applying for a newcomer mortgage in Canada.
Secondly, in reference to this question, we highly recommend you read through this page of our website. It explains how lenders review your mortgage application, and what they look for. Some of the information on that page changes slightly for newcomers to Canada. We’ll explain them below.Read more
There are two overall features that lenders will look for when evaluating your application for a ‘new to Canada’ mortgage:
Click an item below to expand its details.
Your ability to repay loans on time
This is called a credit score, and it comes from an official source called a credit bureau. In Canada, credit scores are rated between 300 to 900. For the ‘new to Canada’ mortgage programs, you must have a credit score of at least 680.
While people are right to believe that bad debt is a negative factor on mortgage applications, this does not mean you should not have any debt. When it comes to building a good credit score, you will want to show that you can take out a loan, and are disciplined enough to pay it back on time. For example, putting purchases on a credit card, or financing a car, but paying those bills on schedule can increase your credit score.
Newcomers to Canada may not be able to easily get a credit score, since they may not have a long history of financial transactions in Canada. Or, they may be recent graduates or divorcees.
To help with this situation, mortgage providers offer some solutions:
- Those immigrating from the United States, the United Kingdom or Australia can use their credit score report from those countries.
- Other immigrants can use a reference letter from their bank in their home country.
- Where no other credit score can be obtained, lenders can use alternative ways to determine creditworthiness. For example, they can look at a 12-month history of bank account transactions to see that you save regularly, make rental payments, and pay other bills on time.
Your ability to afford a home purchase
Apart from a credit score, lenders must also determine that you can afford the home you want to buy. They do this with calculations called a gross debt service (GDS) ratio and a Total Debt Service Ratio (TDS).
A GDS and TDS are essentially your monthly home expenses, divided by your income amount. You can learn more about how they are calculated, here.
You can also learn more about GDS and TDS qualifying factors, here.
What do I need to include in my mortgage application if I am new to Canada?
The mortgage application requirements for ‘new to Canada’ mortgages are not much different than mortgages available to Canadian citizens.
Your mortgage broker will guide you on what to include in your application. They will also help you prepare your application so that it is presented properly to a lender.Read more
Typically, you will need to include:
- Your credit score report (see above for more information, if you are new to Canada).
- Your government-issued photo ID.
- Your proof of income, which can be a Notice of Assessment (NOA) from your recent tax filing. You can also include pay stubs and a letter of employment from your employer.
- Your record of debts and assets, including loan payments, alimony and child support payments, vehicle leases, other property you own, etc.
- Your monthly expenses, going back 6 – 12 months.
- Your proof of having a down payment and closing costs in a bank account, to be able to make a home purchase.
To get help with this process, we highly encourage you to get in touch with us. Mortgage brokers can guide you through the steps of preparing the above documents.
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Receive unbiased advice about newcomer mortgages in B.C., Canada, at no cost to you!
If, after reading the above, you feel you might be ready to buy a home in Canada, we can help you with the next steps. Even if you’re not sure whether or not you’ll qualify, we can still advise you on this matter.
Remember: most of the time, independent mortgage brokers in Canada work for home buyers for free. You have nothing to lose, and there will be no pressure to obtain a mortgage through us.
In addition to being able to find you a mortgage deal from many banks and lenders (instead of just one), independent mortgage brokers can be a wealth of information. It can be extremely helpful to learn the ‘ins-and-outs’ of obtaining a ‘new to Canada’ mortgage, and which rules apply to you.
It may even be that you don’t need this program, or you’d be better suited to use another program. A Canadian mortgage broker in B.C. can give you this information after a simple phone call.
Our team of B.C. mortgage brokers work collaboratively to evaluate your unique case. From there, we can recommend a path to home ownership that works in your best interest.
Contact us today!