How Easy is it for Foreigners to Secure a Mortgage in Canada?
Author: External Author | | Categories: First Time Home Buyer , mortgage , Mortgage Broker , Mortgage Services , new to canada , Pre-Approval , Private Mortgage
Obtaining a mortgage in Canada is relatively easy for foreigners and newcomers to the country because there are very few restrictions that limit foreigners from purchasing a property. In fact, the homebuying process is like the one that Canadian citizens follow! Let’s take a look…
If you are a permanent resident of Canada, or a foreign student or worker working towards permanent residency, you are eligible to buy and own property in Canada. You will need to comply with immigration requirements if you are extending your stay or becoming a permanent resident.
Note: To ease the hot housing market in Canada, Justin Trudeau’s liberal administration has placed a ban on foreign homebuyers in Canadian markets. Currently, the ban is in effect from 2022-2024. Only foreigners with permanent Canadian residency, or foreign students or workers working towards permanent residency are exempt from the ban.
If you are a newcomer looking to purchase a home in Canada, you can qualify for a Canadian mortgage – often at the same interest rates as Canadian citizens. No need to seek international lending approval from your home country or other countries. In fact, you actually cannot seek mortgage financing through an international lender, it will need to be completed within Canada.
There are very few limits to foreign homebuyers in Canada. You are eligible to purchase condos, townhomes, houses, commercial properties, acreages, farms, etc. However, you are exempt from purchasing multi-unit residential properties (properties with 6+ units).
If you are a newcomer to Canada looking to purchase a home, you will need to provide these documents to secure a mortgage:
Employment History: Some lenders may require a two-year Canadian employment history record. This provides proof that you can obtain and hold a steady job in Canada. Plus, it provides a window to build a Canadian credit history. However, some banks (A lenders) may waive this requirement if a larger down payment is made.
Down Payment: The minimum down payment requirement in Canada is 5%. However, for newcomers to Canada the down payment requirement may be raised to 20% of the homes purchase price. For newcomers without two-years of Canadian work experience, the down payment may increase to 35% of the property purchase price.
Credit Check: When you come to Canada, building your Canadian credit is important to secure a mortgage. The sooner you begin building Canadian credit, the higher chance you have at being approved by a lender. Notably, your credit score is not immune to international debts. While it is costly for lenders to pursue international debts, it is possible.
Bank Reference Letter: Newcomers without two-years of Canadian employment may need to reach out to their previous international bank to obtain a reference letter to secure a mortgage in Canada. This allows lenders to examine the individual’s financial history, should they have a limited credit history in Canada.
Should you leave Canada, you are not required to sell the property you purchased here. You buy it, you own it for as long as you wish. If you leave, you could consider turning the property into a rental property for passive income!
The Canadian Mortgage and Housing Corporation (CMHC) is a Crown Corporation owned by the Government of Canada that strives to improve Canadian’s access to housing. The CMHC released a fantastic step-by-step guide on purchasing your first home in Canada as a newcomer. You can access it here: https://assets.cmhc-schl.gc.ca/sf/project/cmhc/pubsandreports/pdf/66144.pdf?rev=ca92f6ab-a98d-487b-9a36-4f7381b9d727
As a newcomer to Canada, you follow a similar process as Canadian citizen to obtaining mortgage financing. The only difference? You need to establish Canadian specific employment and credit history (not just international) to secure a mortgage; or put up a larger down payment.
Note: In some countries, owning property can help speed up the immigration status. Unfortunately, this is not the case in Canada. You will still need to follow all immigration processes and policies to obtain permanent residency and/or Canadian citizenship.
If you are a foreigner or newcomer wishing to purchase a home in Canada, reach out to our team today! We can help you begin your mortgage process and answer any question along the way.