Mortgages in Canada for Immigrants

Mortgages in Canada for Immigrants
Most new Canadians interested in buying a home hail from Britain or America, but an increasing number is coming from China and other East Asian countries. Where you're from, though, is less important than how much planning you've done before you arrive.

Alright, so you've opted to take the leap and move to a new country. After thinking long and hard about it you've settled on the land of snow and maple syrup.

People move to Canada for all kinds of reasons. It has shown it has a resilient economy, it is hospitable toward foreign investment, and it has a stable government and banking system. If you're keen on planting roots in your new country, buying a home is a great first investment but there are a number of regulatory hurdles and obstacles that could present a problem.

oh canada
Oh Canada by ankakay

THINK IT THROUGH

There are a number of considerations one should take into account when thinking about buying a home:

  • What kind of home do you want? Would a condominium suit all your needs or do you need more space?

  • How much can you afford? There are additional expenses beyond the price of the property. Heating, property taxes, home maintenance, and renovation costs should all be considered.
  • Where do you want to live? Canada is a diverse country, and that's reflected in its communities. Big cities like Toronto or Vancouver have vibrant cultural hubs, China Towns, Little Italys, etc. Do you want to be near people with similar cultural backgrounds or would you prefer something different?

Once all of these questions are answered, it's time to start looking. There are a number of resources available on the Internet for homeowners. The Canadian Mortgage and Housing Corporation (CMHC) offers advice in eight different languages; Realtor.ca offers property listings across the country.

"My first piece of advice would be, get yourself a very knowledgeable realtor," says David Smith, mortgage broker, Oriana Financial. "Who are you working with, because you're new in the country? What were the references for that realtor? What neighbourhoods are you looking at? What's the long term plan for the property?"

SECURING A MORTGAGE

Most new Canadians interested in buying a home hail from Britain or America, but an increasing number of homebuyers are coming from China and other East Asian countries. Where you're from, though, is less important than how much planning you've done before you arrive.

"It depends on not so much [where they're from], but as to the status they have when they get here," says Smith. "For example, if they have a work permit, that allows for much better financing opportunities than if they don't."

If you have a job lined up in Canada or are transferring with your company it will make the process exponentially easier, says Smith.

"[If] they've been given that kind of status it's possible to do as much as 95 per cent of the value of a property up to a million dollars for them."

If you don't have a job lined up, the obstacles to obtaining a mortgage can be more strenuous. For many brokers you must have landed immigrant status and at least three months of full-time employment in Canada. Anyone transferred under a corporate relocation program is exempt.

"[Mortgage lenders] are also friendlier towards any immigrant that comes from a country with income taxes so that you then have a very reliable means of establishing how well they can support the burden of the mortgage," says Smith.

Many companies offer special packages for new Canadians and immigrants hoping to get a loan to buy a home and a trained realtor will help guide you through the process.

It's a good idea to get pre-approval for a mortgage. Pre-approval means that your lender commits to giving you a mortgage up to a specified amount, at certain terms and conditions, including the interest rate. Sit down with a lender or broker to discuss your needs. The commitment will be valid for a specific period, usually up to 90 days.

Pre-approval doesn't mean you're locked into a mortgage. You're still free to look at other arrangements but it can take some of the stress out of planning since you'll know how much you can spend on a property.

The CMHC has a list of banks, trust companies, credit unions, and other financial institutions approved to give loans by the corporation.

Rogers Pass British Columbia
Rogers Pass British Columbia by Mike

BUILD CREDIT

When you're looking to get a mortgage, credit and work history are very important. This can present problems for newcomers to Canada as they may have a credit history that's inaccessible to Canadian lenders.

It's important to start building a new credit history as soon as you can. Any bank will be happy to help you plan how to build credit. A regularly used bank account will go a long way. Remember to pay your bills consistently and on time. That includes rent, utilities, cable, and insurance premiums. Look at applying for small loans from your bank so you can prove you can pay them on time and apply for a credit card. Staying with the same employer for an extended period of time will also encourage confidence.

GET INSURANCE

New buyers should also consider getting mortgage loan insurance. If you don't have the 20 per cent down payment required by most banks, these programs can help you buy a home.

According to the Government of Canada, "This type of insurance protects lenders and helps people to buy a home with as little as a five per cent down payment."

magog lake sunrise
Magog Lake Sunrise by Jeff P

GET IT WHILE ITS HOT

The Canadian housing market continues to heat up. The average price for a detached home in Toronto recently shot above $1 million and sales climbed 11.3 per cent in February of 2015 from the same period the previous year. It's a similar story elsewhere in the country. Homes in Vancouver continue to fetch high prices.

The sinking loonie will only help encourage foreign investment here. People with their money stowed in greenbacks or with a currency pegged to the U.S. dollar continue to show interest in Canadian properties.

Canada is a wonderful country with options to fit everyone's tastes. Financing a home may seem like an arduous process, but it's hard to put a price tag on stability and comfort. The important thing is to do your research, take things slowly, and consider all your options.

Title photo by: davebloggs007

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