New to Canada? What New Canadians need to know about Mortgages
If you’ve ever lived abroad you know how difficult it is to get basic things that you take for granted in your own countries such as a bank account, credit cards, or even an internet provider.
Over the last few years, access to banking products and services has become even more complex given new laws and regulations designed to prevent money laundering. For newcomers to Canada, securing a mortgage can be a bit tricky.
Thankfully, there are several mortgage brokers working with Genworth Financial and the Canadian Mortgage Housing Corporation (CMHC) to offer qualified home-buyers who have moved to Canada a mortgage with as little as a 5% down payment.
Approved Mortgage Types and Properties
Acceptable home loans for immigrants and people who have recently relocated to Canada are available for amortizations up to 25 years.
It’s fairly flexible when it comes to the type of property you can buy – most properties on the market are acceptable. There are a few restrictions such as a maximum of two units, and one must be used as the principal residence (meaning you have to live in the property as your main home).
Loan-to-Value Ratio Limits
The maximum Loan-to-Value (LTV) ratio available for people new to Canada is currently 95% and is calculated as follows:
LTV = (Property Value – Down Payment) / Property Value = 95%
For example, if you were looking at a $100,000 property and had a $10,000 down payment:
LTV = (Property Value – Downpayment) / Property Value
= ($100,000 – $10,000) / $100,000
= ($90,000)/$100,000 = 0.90
Therefore the LTV would be 90%.
LTV Ratio and Insurance Premiums
Additional insurance premiums are required based on your LTV ratio - in other words the higher your LTV is, the more of a premium you will pay. This is a type of insurance protects the lender in case the borrower is no longer able to make the mortgage payments.
| LTV Ratio | Premium Rate |
|---|---|
| Up to 65% | 0.50% |
| 65.01% – 75% | 0.65% |
| 75.01% – 80% | 1.00% |
| 80.01% – 85% | 1.75% |
| 85.01% – 90% | 2.00% |
| 90.01% – 95% | 2.75% |
Lenders will look at your Total Debt Service Numbers and your Gross Debt Service Number to decide how much you can afford to borrow. Read more how this is calculated >
Other Requirements
- You have moved to Canada within the last 3 years
- You have at least 3 months of full-time employment in Canada – there is an exemption available if you have been transferred through your work
- You have a valid work visa or have already received landed immigrant status
- You will need to claim all of your international debts and obligations so they can be included when calculating your Total Debt Service Ratio (rental income on foreign properties can be excluded from the TDS calculation)
Necessary Documentation
You will need to supply the following documents to the mortgage lender with a valid work visa or verification of landed immigrant status.
| Loan to Value Ratio (LTV) | |||
|---|---|---|---|
| 91% to 95% | 86% to 90% | 85% or less | |
| Credit Requirements | International credit report proving a strong credit history | Reference letter from an internationally recognized financial institution OR 6 months of historic bank statements from a primary account | If no credit references are available, a Canadian family guarantor with a strong credit profile is required |
| Down Payment | 5% from own resources | 10% from own resources, 5% can come from a corporate relocation subsidy | 15% from own resources. Up to 10% can be a gift from the guarantor |
Please note that this program is not available to any foreign Diplomats in Canada or any other foreign politically appointed individuals who don’t pay income tax in Canada.
Interested? Got any questions? Speak to a Mortgage Specialist If you’ve recently moved or relocated to Canada please get in touch with us, and we’ll arrange for a Mortgage Specialist to call you back.
