Recent data released by Statistics Canada shows that from 2011 to 2016, the population of Canada increased by 1.7 million or five per cent, and two-thirds of that population growth is being attributed to the number of immigrants entering the country. In spite of the fact that Canadians are getting older and procreating less, the number of people in the country is growing, and more people living here means that more people are going to want to need mortgages to buy a home.
Although interest rates are low, Canada has some tough regulations when it comes to mortgage lending that can make the home buying process complicated for even the most ideal borrower. If you’re a newcomer to Canada, there are some additional hurdles that you have to jump if you want to own a home.
Whether you’re a newcomer to Canada or a long-time resident, if you’re going to borrow money, the lender likes to see a) that you have income to repay it and b) that you have a history of repaying money. If you’re a landed permanent resident and/or from another wealthy countries, you may have both of these things. In that case, you’re pretty much on par with any other Canadian who’s in the market for a home.
Even if you don’t have much or anything in the way of credit history, there are ways to get a mortgage, according to Dara Fahy, mortgage planner, advisor, and broker with City Wide Mortgage Services.
“As long as they’re permanently landed and have employment, the credit is not hard to work around,” he says. If someone comes to Canada and they have no established credit, for example, some banks have “startright” programs where they will accept credit sources that are different from the typical examples often required by lenders. “Maybe they’ve been here for a year, and while they’re becoming established they rented a place – a landlord reference would be acceptable. We can pull an international credit bureau, especially from the U.S., from the U.K. We can get bank reference letters from their banks, from their home country. So that’s stuff we can work around. For immigrants who are established, landed and working, it’s actually not very difficult at all.”
If, however, you’re coming from a less developed country or you’ve immigrated to Canada without having employment lined up, then things are going to be a little bit more difficult. In that case, one thing that you’re going to want to do right away is to start establishing credit. One of the easiest ways to do so is to get utilities or other bills in your name and pay them on time. Another way is to get a credit card, but beware – use it minimally, and pay it off on time. Open bank accounts and, if you haven’t done so before you immigrated, move your money from your old bank into the Canadian bank account.
“I always encourage them to bring their money over as soon as possible and have it in a Canadian bank account,” Fahy says. “There’s no question that having Canadian credit is helpful.”
Moving to a new country can be daunting. Even if you know the language and have employment lined up, getting your bearings and making connections is a difficult task. If you don’t share the language and/or culture of your new home, then it’s even harder.
Finding a place to live is a particular hardship, because it’s immediate. Some immigrants owned homes in their country of origin and desire to do so again, but the differences between the Canadian mortgage market and getting mortgage/buying a home in other countries can be striking.
Mortgage broker Amina Mohamed says that education is the biggest hurdle to home ownership for newcomers to Canada, and depending on where they land, they can be “very shocked” at the pricing and the market and how hard it is to get into a home or a condo.
Mortgage planner Suyan Ge, who works with a lot of new immigrants from China in particular, agrees that there’s often a period of shock.
“The process of mortgage application surprises many immigrants,” she says. “For example, most new immigrants like to have condition[al] approval before wiring their down payment from their own country to Canada.”
The preapproval process can be confusing for Canadians, much less immigrants, and one particular challenge is learning the difference between a prequalification and a preapprova
“These poor people are hitting the market, putting an offer in on a property, saying ‘I was approved,’ and then they go to the bank and it’s a very different story. And I’m finding that a lot
It’s tough, she says, because while banks have their place in helping people get established and settled, mortgage brokers have the ability to pick from different products depending on the needs of a client and their particular situation, and it’s hard to educate people after they’ve gotten information from the bank.
“The first stop is always the bank, which is great because it helps them establish initial credit,” she says. “Where the bank is not great is that they don’t give them enough education or any education about how the mortgage market works.”
There are two categories of immigrants: those who are wealthy or who have saved up their money during their lifetimes and are moving to Canada for retirement or for a better quality of life, and those people who are moving for the opportunities that the country provides, whether that’s employment or safety for themselves and their families. Generally speaking, things are a little harder for those in the first category, because regardless of how much money they have, they still need to show a certain amount of money in liquid assets and provide a large down payment, around 35 per cent.
“Basically, we don’t have any income from them,” Fahy says. “They might have millions of dollars where they came from, it doesn’t matter. It doesn’t help us. At the end of the day, the bank wants to know how they can pay this mortgage. With zero income, it’s difficult to prove that, so what they want to see is a large down payment, and then they want to see cash on top of that as a fallback position to be able to service this [mortgage] for 2-3 years at a minimum.”
And, Fahy continues, people might not want to do that.
“The problem is, if they want to go less [money] down and not have to jump through those hoops or be able to show this or that, you’re talking about B side or private stuff, where the rates are higher, and they don’t like that, because they are wealthy and typically high net worth people don’t want to pay six per cent.”
Deciding whether or not to get a mortgage
Keep in mind, too, that where you land in Canada initially isn’t always where you’re going to settle. You might find a job opportunity clear across the country, or simply not like the city or town that you find yourself in. Getting a mortgage is a big step, and so finding a mortgage broker that you trust and taking your time to educate yourself on Canadian mortgages and housing is a prudent move.
“For the not-so-wealthy, not so high-net worth [immigrants] who are coming here to live and may be in a different phase of their life, building and borrowing and trying to grow a family and things like that . . . I would establish credit a soon as possible, it will help, but I think for them, I probably wouldn’t even be thinking about borrowing until I had lots of income, until I had established my career or some kind of employment here.”
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