Here’s How to Secure Your First Mortgage in Canada as an Immigrant
Whether you’ve been living and raising a family in Canada for years, or just moved here (welcome, by the way!) getting a house is something you’re probably thinking about.
So, how do you get a mortgage in Canada for the first time? And is it even possible for new immigrants?
Just like we’ve busted myths about money transfers, here at Remitbee Online Money Transfer we’re going to take you through how to get a mortgage.
Canada Immigrant Mortgages 101
To get a mortgage, there are some things you definitely need:
- Landed status OR a valid work permit with an application for landed status pending.
- Proof of at least 3-months employment in Canada.
- 2-year history of credit repayment or debt history (a credit report from your home country is ok if you’ve not been in Canada for 2 years).
- Information about any assets you might have (a car, for example).
- A deposit saved for your desired home.
- A home you desire!
If you’re new to Canada and don’t have much of a credit score in your home country, considering choosing a secured credit card as soon as you arrive. Remember, don’t spend more than you can afford. Showing that you can pay off a credit card on time each month will help you demonstrate to mortgage lenders that you are responsible!
For immigrants with landed status, you can borrow up to 95% of the property’s value if it’s under CA$500,000.
For properties worth between CA$500,000 and CA$1million, you’ll need to save 5% of the first CA$500,000, plus 10% of the remaining value.
For properties worth over CA$1million, you’ll need to save 20%.
For example, if the home you want is CA$763,600 (the average cost of a house in Toronto) you’ll need to save 5% of the first CA$500,000 which is CA$25,000.
You also need to save 10% of the remaining CA$263,600 which is CA$26,360.
The total down payment you need to save is $51,360.
Once the mortgage is set up, you’ll pay back the remaining CA$712,240 plus interest as a monthly figure, just like you pay rent.
If your down payment is less than 20%, you also need to pay mortgage default insurance. This can be as high as 4.5% of the mortgage total. But don’t worry! This can be added to the mortgage total, so you pay it off monthly.
The mortgage provider needs to confirm that the monthly cost is something you can afford, so be prepared to prove your income.
More Tips for Canada Immigrant Mortgages
Once you’ve got the basic things you need to apply for mortgages, there are a few tiny things you need to keep in mind:
- Shop around for the best rates, just like you would for an online money transfer. Interest on mortgages can add years to your repayment so finding the best rate is important.
- Find a good realtor! This will make the whole house hunting process much more enjoyable.
- Get a good preapproval rate. Once you’ve locked in a rate with a mortgage provider, you have some time to shop around and make that final decision on your house – or change your mind and find somewhere better, without worrying that the rate will change.
- Budget for extra costs – not just furniture for your new home but home inspections, closing costs, repair work and other admin fees you’ll need to pay to realtors, brokers and so on.
This mortgage is probably going to be the biggest financial commitment of your life. Let’s get it right!
Can You Afford a Mortgage in Canada as a New Immigrant?
A good thing to do is calculate how much it’s going to cost you each month. Besides the mortgage you’ve got to pay bills, fuel for the car (will it be a longer commute now?), apply for schools, home insurance and taxes…
If you’ve not thought about it already, now is a great time to look into tax-free savings which you’re eligible for even as an immigrant in Canada. It makes saving much easier when you’re dealing with a mortgage too.
RESP – Registered Education Savings Plan allows you to save for your children’s education after secondary/high school.
RRSP– Registered Retirement Savings Plan allows you to save for retirement with tax benefits.
Getting a Canada mortgage for new immigrants requires patience, planning and a lot of saving. But it’s definitely achievable and could be in reach!
Check out our blog for more finance tips for immigrants in Canada.