Everything you need to know if you’re New to Canada and looking to secure a mortgage
Whether you’re a permanent resident or newly arrived in Canada, finding and financing your future home is one of the most important decisions you can make for yourself and your family. At The Mortgage Professionals, our value promise is to deliver you simplified mortgages and professional results. We have curated all the latest information about New to Canada mortgage products to help you better understand the options and products available and to help you start planning your future. Before you begin to consider what mortgage products are available to Canadian Newcomers, let’s define who qualifies as a Newcomer, and the general requirements in order to apply for New to Canada mortgages.
Important Resources for New to Canada Immigrants:
- Click here for the Government of Canada’s Newcomer Information – Discover local communities, services, events and forums all designated to help accommodate anyone newly moved to Canada.
- Understanding important Mortgage Terminology basics: Click here.
- Tips on things to avoid before applying for a mortgage: Click here
- Try our free online mortgage calculator to play around with your numbers. Keep in mind these are only estimates and the best way to find out what you can afford is to contact a Mortgage Professional.
What’s the difference between a New to Canada Mortgage and a Regular Mortgage?
The truth is that most Canadians will have a mortgage at one point or another. According to the Government of Canada’s Financial department, 9 in 10 Canadian homeowners aged 25-44 have one. However, depending on who you are, what your credit looks like, and whether or not you have sufficient employment history will affect which mortgage products are available to you. Or in other words, what you can qualify for.
New to Canada mortgages are different than regular mortgages because they accommodate for the increased risk taken on by the Lender. Most Canadian newcomers generally do not meet the eligibility requirements for a regular mortgage. Below are the two main concerns that most lenders have when deciding what you qualify for.
- A lack of Canadian employment history; and
- A lack of Canadian credit history.
Lack of Canadian Employment History
- Banks, or Lenders, prefer to see proof that you’ve been employed for the last two years from the date of your mortgage application in Canada. Having a verified work history will show lenders your level of employment stability and will grant more leverage in securing a better mortgage product. Some of the requested documentation collected in regular mortgages consist of job letters, pay stubs, the last two years of T4s/T4As, or 2 years of business financials– depending on whether you are an employee or self-employed.
Lack of Canadian Credit History
- Most banks will request a copy of your credit bureau report. Not only to see how much debt you carry, but to know how you have been handling it over the past few years. Having a mortgage broker is useful as they can access and review your report and offer insight on how you can improve your credit. It is important to increase your good credit prior to applyng fo r a mortgage. A normal Credit Report generally includes a history of payments, revolcing credit (credt cards), installments (loans), or other mortgages you may have. A credit report discloses important information which helps Lender understand what knd of risk you carry as a borrower. They can see if you have missed any payments or made late payments, and all your current credit limits and balances. An established credit history shows that you have been consistently responsible with your finances. Learn tips on how to boost your credit here.
What if I don’t have 2 years of Canadian employment and credit history?
This is why Canadian Newcomer Mortgages exist. Below are a few general requirements and tips to qualify for a Canadian Newcomer Mortgage.
New to Canada Mortgage Eligibility Requirements
- A New to Canada immigrant is someone who has immigrated to Canada within the past 5 years. In other words, you are a permanent resident/landed immigrant, or a non-permanent resident with a work permit.
- Both permanent residents and non-permanent residents can get a newcomers mortgage, but non-permanent residents may have higher down payment requirements.
- The minimum downpayment can range from as low as 5% for any homes less than $500,000. However your downpayment minimum will depend on the Lender, and whether or not you have any Canadian credit history. A conventional mortgage (one that does not need mortgage default insurance) needs to have a minimum downpayment of 20%.
- You will need to be employed full-time in Canada for at least 3 months. Alongside at least some full-time employment history either from your home-country or from Canada. Unless your employment has transfered to Canada by your current employer.
- Your debt service ratio shows how much of your income goes towards servicing your debt. The higher this ratio, the less attractive the mortgage products available to you will be. You will need to have a gross debt service ratio (GDS) of 39% or less, and a total debt service ratio (TDS) of 44% or less to qualify for primary lenders.
- The mortgage stress test rate will be used to test your GDS and TDS ratios. Your foreign debt is included when calculating your GDS and TDS, but your foreign rental income is not included. The current rate for the stress test is 5.25%. This means that some primary lenders will assess your ability to afford your qualified mortgage amount at a rate of 5.25%. However, the stress test is exactly that— a test. Primary lenders will test your room for payment afordability despite the actual rate you will pay.
New to Canada Mortgage Tips
- New to Canada Mortgages have more lenient guidelines and requirements than traditional mortgages. If you do not have a Canadian credit/employment history, Lender exceptions can be made.
- Ideally your down payment should come from your own resources and savings. Lenders can enforce higher rates and downpayment ratios if the majority of your fund sourcing is gifted or borrowed. They can also refuse gifted or borrowed money altogether.
- Not all lenders will allow non-permanent residents to purchase rental property in Canada. You may need to explore private lender options.
- You should try to build your Canadian credit history as soon as possible. Some banks offer free credit cards for New to Canada even if they don’t have any credit history.
- The most common mortgage default insurance for New to Canada mortgages are offered by CMHC, Sagen, and Canada Guaranty. These are the three top mortgage insurance providers in Canada.
Once you have determined your eligibility for New to Canada Mortgage options, you will need to explore the different products available. You can secure a mortgage with either a big Canadian bank, a small local lender, or even private lending sources. Contacting a Mortgage Professional can help find the best solution for you.
Canadian “Big Bank” Newcomer Mortgage Products and Requirements
TD Mortgages for Newcomers
- Canadian credit history is not required if you are a permanent resident and have been in Canada for less than 5 years. Provided you meet all of the other eligibility and credit criteria of TD Canada Trust.
- You must be a permanent resident or have applied to become a permanent resident in Canada.
- You must have proof of residency, such as a permanent resident card, confirmation of permanent residence, or a temporary permit.
HSBC New to Canada Mortgage
- HSBC Canada’s Newcomers Program lets you pre-open a Canadian bank account before you arrive in Canada if HSBC operates in your country
- With HSBC, they can consider your foreign credit history for your HSBC mortgage.
Scotiabank StartRight Mortgage Program
- Available for permanent residents that have been in Canada for five years or less.
- Also available to temporary residents, such as international students and foreign workers, that want to buy a home in Canada.
- If you have $200,000 in liquid assets, you may be eligible for Scotiabank’s Equity Offset program. This may allow you to increase your total allowable mortgage amount or secure you a more favourable rate.
- The minimum down payment is 5%, but Scotiabank may require you to make a larger downpayment.
- Making a down payment of less than 20% will require you to obtain mortgage default insurance
- With Scotiabank, your downpayment cannot be gifted or borrowed.
Source: https://startright.scotiabank.com/newcomers.html
Need help finding which New to Canada Mortgage product is best for you?
Understanding how your mortgage can work for you is difficult. This is why hiring a Mortgage Broker can help simplify the process and find you the best solutions given your current circumstance. Everyone is different, so let us help you tailor your mortgage to you.