Mortgages for non-Canadians
Canada has had an incredible real estate market for the last 20 years, and we are blessed to live in one of the most desirable countries in the world. All of this means that many people who don’t reside in Canada try to either invest in Canadian real estate or buy real estate to have a place to stay when they visit family in Canada. Because non-Canadian buyers have different needs and represent different risks to mortgage lenders, their mortgage programs are different from normal Canadian mortgages. The goal of this article is to explore some of the most common guidelines of non-Canadian mortgages so that you can understand what you need to do to be eligible for such a mortgage.
Before we start, let us first determine who mortgage lenders typically consider being “Non-Canadian” for mortgage purposes:
- Applicants with no residential status in Canada. E.g. Visitors
- Any Canadian who does not pay income taxes in Canada. E.g. Canadians who earn their income elsewhere in the world and have chosen to pay taxes elsewhere and not in Canada.
- Applicants who may have residential or temporary residential status in Canada, but for whatever reason are in transition and don’t earn eligible income in Canada yet, but they do in their country of origin.
As we can see above, even Canadian Citizens who don’t earn their income in Canada and/or don’t pay income taxes in Canada may have to apply for a mortgage under a non-Canadian mortgage program.
It is important to note that very few mortgage lenders offer non-Canadian mortgage financing, which means that your mortgage choices and options will be very limited. Here are the most common, prime lender, non-Canadian mortgage eligibility guidelines:
- Property Occupation: Although some lenders may offer mortgages on investment properties, most limit their non-Canadian mortgage lending to owner-occupied properties.
- Property Location: Properties should be in a marketable, urban area.
- Supporting Documents: Mortgage lenders will require all supporting documents up-front from borrowers. Documentation must be in either English or French, and if not, the documents must be translated into one of Canada’s official languages by an accredited member of the Association of Translators and Interpreters of Ontario [ATIO]
- Income verification: Only traditionally verified personal income will be considered for mortgage qualification purposes. Equity lending and/or “stated income” or business income are not eligible for non-Canadian mortgage lending. Lenders may also require 12 months’ bank statements showing your income deposits.
All currency will be converted to Canadian Dollars for mortgage eligibility purposes.
- Credit: A strong credit record is required. We will check your credit in Canada, and you will have to provide an acceptable international credit report as well as an acceptable reference letter from your primary financial institution in your country of residence.
- Other real estates: You will need to disclose other real estates that you own and provide relevant supporting documents to prove payments, etc.
- Net Worth: You will need to prove sufficient net worth in liquid assets to be eligible for a non-Canadian mortgage, and your lender may require a certain amount of liquid assets to be invested with the lender for payment security.
- Down Payment: The minimum down payment will be 35%, and the funds must be from your own resources, not borrowed nor gifted.
- Closing Costs: Your closing costs must be from your own resources and depending on where you purchase the property in Ontario, you may be subject to the Non-Resident Speculation Tax [NRST]
- Debt Serviceability Ratios: Some lenders have contracted debt serviceability ratios for non-Canadian mortgages, which makes mortgage eligibility more difficult.
- Power of Attorney: You will need to be in Ontario and meet with your solicitor and/or mortgage lender in person to sign your mortgage documents and close the mortgage. Power of Attorney is NOT allowed.
As you can see from the above, it is important that you are pre-qualified before you submit an offer to purchase a property.
Our pre-qualification process will allow you to determine your mortgage eligibility and avoid potential mortgage pitfalls.
- For information & illustrative purposes only.
- Subject to change without notice or prior warning.
- Based on estimates.
- Subject to lender approval
- Subject to lender terms & conditions
- It is the borrowers’ sole responsibility, at his/her sole discretion, to obtain professional advice from any parties s/he deems necessary, including, without limitation, their accountant and independent legal advice from their solicitor.
- This document does not deal with mortgage risks associated with non-Canadian mortgages. Subject to the borrower understanding all risks prior to submitting an offer on a property.