Many lenders offer special programs to help newcomers to Canada qualify for a mortgage, and these programs sometimes require a larger down payment than a more established Canadian resident would need. For instance, CIBC’s program for new residents and non-residents has a minimum down payment of 35 per cent for a conventional, uninsured mortgage and 5 per cent for high-ratio insured mortgage.
However, not all lenders offer these types of programs. New to Canada programs are usually offered by big banks and select broker lenders (some credit unions will consider newcomers). The majority of lenders want two years of work and credit history, and unless the borrower is transferring to Canada within the same multinational employer, it would typically need to be within Canada.
Many home-buyers who are just establishing themselves in Canada want to use money they’ve saved in their home country towards their down payment. Here’s a look at the areas to consider when using a down payment from overseas.
- Your down payment can be written in the form of a Canadian Certified Cheque or a Canadian Bank Draft. This typically means that you’ll need an account with a Canadian bank, but some international clients find that an international bank with branches in Canada and their home country (such as HBSC) can accommodate their needs.
- Your down payment needs to be in Canada first. Lenders typically require documentation of the origins of a down payment. If you’re taking out an insured mortgage, then the lender will typically want to see that the funds have been in your Canadian bank account for at least 90 days. For uninsured mortgages, 30 to 60 days may be sufficient. Some lenders ask for a history when funds are gifted, and gifts are usually only permitted as down payments when they come from immediate family such as a parent or sibling. Depending on where the money originates, it may be subject to rules around international money transfers in your home country as well as in Canada. In Canada, CRA requires financial institutions to report international ETFs of $10,000 or more. Plan ahead so that you can get the proper amount of money transferred and documented before closing.
- Currency fluctuations can affect the size of your down payment. The value of the Canadian dollar relative to the currency in your home country can have an impact on your buying power, so if the loonie dips in value and you know you’ll eventually need a down payment, that can be a good time to transfer funds and maximize your buying power. For instance, earlier this year, the loonie was valued at $0.78 CAD = $1 USD, so an American living in Canada would be able to transfer $10,000 and get close to $12,200 CAD. As the loonie gains in value relative to other currencies, though, it would take more of your source money to create the size of down payment you need.
If you’re new to Canada, you may want to choose a mortgage broker who’s worked with other newcomers and knows what programs are available and what their criteria are. In some countries the clients pay a fee to arrange a mortgage. In Canada, however, the services of a mortgage broker are free to the client. This can help expedite the process and ensure that you find the right mortgage for your needs. For more information on qualifying for a mortgage, comparing properties and more, check out Lavarates’ Complete Home Buying Guide 2015 - BC Edition.