By Nick Holloway

Canada has always been recognised as very welcoming to newcomers and prides itself on its wide diversity of population. According to the 2016 Census, 7.5 million foreign-born people have arrived in Canada through the immigration process, representing over 1 in 5 persons in Canada. Having personally emigrated from the UK to Canada in 2014, I am proud to be included within that statistic!

When it comes to sourcing mortgage financing, one of the challenges newcomers think about is the fact they have a limited history in Canada for lenders to review for a credit application. However, there are many options open for new to Canada applicants which are designed for newcomers who have landed in Canada within the last 5 years which assist in overcoming some of these challenges. A mortgage application between a borrower and lender is primarily built on 3 main pillars, being employment income, credit history and down payment. I will cover in more detail each of these pillars from the perspective of new to Canada applicants.

Employment income

Typically a lender will accept a 3 month full time employment position in Canada as sufficient to verify income, or if they arrive on a corporate relocation program, the 3 month period may be waived. If the applicant is self-employed or business for self, the income verification might be overcome by increasing the down payment amount.

Credit history

As a credit score is required for determining mortgage applications, a newcomer may not have a significant history with the major Canadian credit agencies such as Equifax or Trans-union. In lieu of a mature credit score in Canada, the lenders may consider a strong international credit report to support the application, alternatively they might look for a 12 month history in Canada of responsibly paying rent as well as utility billing in the applicant’s name.

Down Payment

Depending on the income and credit factors above, the down payment can start from as low as 5% of the purchase price, assuming these funds are from the applicants own resources and held in accounts in their name for longer than 90 days. For any down payment which is less than 20%, this is called a high ratio mortgage which requires mortgage default insurance to be paid which can be added to the mortgage total. It is important to note that high ratio mortgages in Canada provide the borrower access to some of the most competitive mortgage rates available to the market. Once the default insurance has been paid on the initial purchase, it can often be ported to any subsequent property purchases so the borrower might be able to benefit from these competitive rates for any following mortgages they hold.

There are many factors which go into a mortgage application which differ depending on your individual circumstances. For an accurate assessment of your specific mortgage needs, it is best to discuss your options with a licenced Mortgage Agent who can review all the components which go into creating your mortgage application and will help to set up a plan for you to achieve home ownership here in Canada. If you have any questions and want to discuss your mortgage with me, I would be glad to help.

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