Did you know that Canada’s annual immigration is about 300,000 people? That’s a lot of folks who find themselves new to Canada each year. This time we’re looking at some homebuyer journeys that reflect different variables on account of being a new or non-resident. We’ll be highlighting some of the challenges involved but those didn’t stop us from finding them mortgage solutions!
Our first story is actually that of a professional hockey player (who will remain anonymous). He was referred through a mutual friend and was looking to invest in a property here in Ottawa. Given he was a pro athlete, income was not an issue but he did play on a team based out of the US. Since he lives there, he doesn’t declare income in Canada. Even though he has his citizenship, he doesn’t pay tax in Canada and is therefore considered a non-resident. For this reason, our lenders required him to pay a minimum of 35% down which he was not looking to do when starting his home-buying journey.
Regardless of citizenship, our lenders treat the situation like a non-resident scenario. Fortunately for him, he was able to get an exception based on certain criteria. It is standard for someone needing to make a down payment of 35% or more if they are a non-resident. A higher down payment also keeps your loans cheaper and can save you more money in the long term. That said, the criteria to qualify are more strict. In this case, we pursued an alternative solution —private lending. In a private lending scenario, our hockey player ended up being able to put less down and simply pay a higher interest rate on the loan.
Let’s look at a different situation though that might be a little more reflective of people new to Canada, that of a student. Our client this time was a student coming to Canada to study with a temporary school Visa who ended up staying. He renewed his Visa, started working full-time, and soon enough was looking to buy himself a home. When it came to pre-qualification, all the boxes were checked (full-time employment, a Canadian credit history, and a 5% down payment). Since he was on a temporary Visa however, the minimum down payment required was 10% instead of 5%. This doubling goes for all temporary residents who must have that 10% to secure a loan.
Pro tip: Note that 5% must be from your own funds, the other 5% could be a gift.
What we did for our student turned full-time worker here was actually help him obtain his permanent residency status in time for the deal to close. Due to his timing of applying for his permanent residency prior to beginning the mortgage qualification process with us, we were able to offer him 5% down in the end as his status had changed. In a different situation, if he had remained on a temporary Visa, the only other solution would’ve been to receive a gift or find a way to make up for the other 5% needed for the down payment — an ambitious Kickstarter goal for sure!
Our third story is that of a high-tech worker who was transferred to Canada. Since she was transferred for work purposes, she was given permanent residency status right away. Her husband on the other hand was only able to obtain temporary status in Canada. The couple had only been here for about 18 months before deciding they want to take root and begin shopping around for a home. The couple had been renting previously and both of them had full-time employment. The first challenge incurred was due to the fact that they had only been in Canada for 18 months. The second challenge was that their banking history from their previous country did not translate well to the Canadian banking system.
Typical credit requires at least 24 months of history to be accepted by our lenders and the additional discrepancies between banking systems made it more difficult to establish a reputable financial history. The couple had full-time employment and enough for a down payment but they lacked the financial and credit history our lenders review as part of their standard process. Not to worry though, we were actually able to utilize 12 months’ worth of rent and utility history in order to provide ample proof of financial responsibility to satisfy our lenders in this respect.
Pro tip: If you’re immigrating (or have family immigrating) to Canada, make sure you (or your family) get your (or their) name on a lease and utility bill, don’t go all inclusive for rental.
As you can see, with three different homebuyer stories comes three different circumstances and respective lending hurdles to overcome. Contact the Kyle Miller Mortgage Agent team if you’re newer to Canada and looking to buy a home. We take the time to understand your situation and provide you with different mortgage options and solutions!
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