Guide: New-to-Canada Mortgages

20 May 2023 By: devonjones0 comments

Moving to a new country is an exciting adventure, but it often comes with financial challenges, especially when it comes to buying a home. For newcomers to Canada, securing a mortgage can seem like a daunting task. However, with the right information and preparation, obtaining a new-to-Canada mortgage can be a straightforward process. In this blog post, we will explore the requirements, eligibility criteria, credit considerations, down payment requirements, mortgage insurance, and the duration of stay in Canada for newcomers to be eligible.

Introduction: Moving to a new country is an exciting adventure, but it often comes with financial challenges, especially when it comes to buying a home. For newcomers to Canada, securing a mortgage can seem like a daunting task. However, with the right information and preparation, obtaining a new-to-Canada mortgage can be a straightforward process. In this blog post, we will explore the requirements, eligibility criteria, credit considerations, down payment requirements, mortgage insurance, and the duration of stay in Canada for newcomers to be eligible.

Work History and Employment Duration

 When applying for a new-to-Canada mortgage, lenders typically require a minimum duration of employment or work history. While specific requirements may vary among lenders, a general guideline suggests that newcomers should have a minimum of three months of employment in Canada. This requirement helps lenders assess the stability of income and the ability to make regular mortgage payments.

Probationary Period Considerations

While being on probation at a new job may impact your mortgage application, it is not an automatic disqualifier. Lenders will evaluate various factors, including the type of employment, industry stability, and the likelihood of probation being successfully completed. Some lenders may require you to have completed your probationary period before granting a mortgage, while others may consider it on a case-by-case basis. It’s essential to discuss your employment situation with a mortgage professional to understand your options.

Credit Considerations

Establishing credit history is crucial for mortgage approval. However, newcomers may not have a Canadian credit history, which can pose challenges. In such cases, lenders often consider alternative methods to evaluate creditworthiness. These alternatives may include:

a) International Credit History: Some lenders consider credit reports from the applicant’s home country or countries where they have previously lived. This allows them to assess creditworthiness based on prior financial responsibilities.

b) Bank References: Providing references from a banking institution where the applicant has an existing relationship can help strengthen their mortgage application.

c) Rental Payment History: Consistently paying rent on time is a positive indicator of financial responsibility. Some lenders may consider rental payment history as a substitute for credit history.

Minimum Credit Score

There is no specific minimum credit score requirement for newcomers to Canada mortgages. Each lender has its own criteria for evaluating creditworthiness, and while a good credit score is typically beneficial, other factors, such as employment history and down payment, may carry more weight in the decision-making process. It’s advisable to maintain a good credit score by paying bills on time and managing debts responsibly.

Minimum Down Payment and Mortgage Insurance

The minimum down payment for newcomers to Canada is typically the same as for Canadian citizens and permanent residents. Currently, a down payment of at least 5% of the purchase price is generally required. However, it’s worth noting that a higher down payment can be beneficial as it reduces the amount borrowed and lowers mortgage insurance costs.

Mortgage insurance is typically required if the down payment is less than 20% of the purchase price. Mortgage insurance protects lenders in case borrowers’ default on their mortgage payments. The cost of mortgage insurance is calculated as a percentage of the mortgage amount and can be added to the mortgage principal or paid upfront.

Duration of Stay in Canada

The duration of stay required to be eligible for a new-to-Canada mortgage may vary among lenders. While some lenders may require permanent residency, others may consider applicants on work permits or visas. Generally, most lenders require newcomers to have legal status in Canada and a valid work permit or visa. It’s recommended to discuss your specific situation with a mortgage professional to determine your eligibility.

Conclusion

Acquiring a new-to-Canada mortgage is an attainable goal with the right information and preparation. By understanding the work history requirements, exploring credit alternatives, maintaining a good credit score, ensuring an adequate down payment, and familiarizing yourself with mortgage insurance, you can navigate the process more confidently. Additionally, consulting with a mortgage professional or reputable lender will provide you with personalized guidance tailored to your specific circumstances. With perseverance and diligence, you can make your homeownership dreams come true in your new country.