It can be quite daunting to buy a property in another country – even one as well-organized and well-managed as Canada. Looking for a mortgage as a non-resident is just one more step in the process, and it’s important to manage your expectations before taking the plunge and buying property.
With the recent introduction of a 15 per cent tax for non-residents, many of my foreign clients have been asking me to clarify whether or not a temporary resident is even eligible for a mortgage on a property in Canada. The short answer to that question is yes. As long as they are here working on a valid visa and reporting income in Canada, we can use that income to qualify them for the mortgage.
Workers, Students or Investors
You would think that when it came to a temporary resident obtaining a mortgage, it would make a difference what your long-term goals are here in Canada (for example, studying for a few months with plans to return home, as opposed to being on a work contract with the intention of applying to become a permanent resident). But when it comes to applying for a mortgage, most lenders don’t make much of a distinction.
CIBC, for example, does not distinguish between new residents (those who have been in Canada for five years or less); foreign workers who have a year-long work permit; international students with a study permit; and non-residents looking for a second property or vacation home. If you obtain a mortgage for a property here and meet any of these categories, a 35 per cent minimum down payment with CIBC is required if you want to avoid the insurance premium. If you can not come up with 35 per cent, minimum 10 per cent will be needed as long as your income qualifies for the loan. Down payment history will also be required and funds need to be in Canada for a window of 30 to 90 days. In many cases the funds will be traced to see where the money is coming from.
Other Qualification Requirements
There are a few other qualifications a temporary resident here for work must meet when looking to become a borrower. In addition to a valid work visa and letter from the current employer, a minimum of three months full-time employment within the country is required. If you’re just beginning your work contract and haven’t had time to establish your credit here, you may need to include credit reports from your home country and/or references from banks and your employer. If you’ve been relocated to Canada for work, this will go a long way in demonstrating your situation here and your history at home, all of which will help to speed up the process.
An article last year in the Financial Post reported that the number of non-permanent residents in Canada is hovering around 770,000 and is the fastest growing demographic in our country. With 95 per cent of non-permanent residents here under the age of 45, almost half of that number is made up of workers, around 38 per cent are students, and the remainder belongs to the humanitarian or refugee category.
In the past few years I’ve had the chance to meet a number of temporary residents here in BC. Some have already become permanent residents and many are in the process. The new foreign tax has definitely put a hold on these foreign nationals starting their life here in Canada. Even though some of them are in the process of getting their PR, because they don’t currently have it, they will be faced with the new tax.
My “Mortgage Qualification Tips for Newcomers to Canada” is a good place for temporary residents to get information on how to find a mortgage, as well as property taxes and other useful tips.