Mortgage Options for New Canadians

Did you just immigrate to Canada, or are you thinking of doing so? You’re probably curious about the mortgage options available to you as a newcomer.

New immigrant mortgages are a great way to make the dream of homeownership come true in Canada. A newcomer mortgages help you buy a home when you lack Canadian credit and employment history.

Let’s look at what a newcomer mortgage is, who is eligible, how to get one, and how much you’ll likely need to provide as a down payment.

What Is a Newcomer Mortgage?

If you’re like most Canadians, you’ll need a mortgage to buy a home. Even if you could afford to buy a home in cash, many people choose to take out a mortgage instead. Mortgage debt is typically the cheapest form of debt available, so it often makes sense to take out a mortgage, even if you don’t need it. It can be a lot more costly to cash out your investments to buy a home and lose out on the potential returns than it is to borrow mortgage funds.

A newcomer mortgage is a specific type of mortgage loan offered by mortgage lenders for people who are new to Canada. It’s typically for someone who has arrived within the last five years. These mortgages were created to make it easier for newcomers to qualify for a mortgage here.

The main benefit is that these mortgages address the major challenges faced by new Canadians in getting a mortgage. Lenders typically want to see you have an employment history of at least two years in Canada before they will give you a mortgage. With a newcomer mortgage, you may be able to get away with having as little as three months’ employment history since you’re new to the country.

Lenders also want to see that you have two years’ worth of Canadian credit history. Again, newcomer mortgages often don’t have this requirement. If you have cellphone or utility bills to show that you’re responsible with credit, a lender that offers newcomer mortgages may be ok with approving you for one, despite lacking a Canadian credit history.

Who is Eligible for a Newcomer Mortgage?

Although each lender has its own eligibility criteria for newcomer mortgages, there are some general criteria lenders share across the board.

Lenders generally want you to be a permanent resident in Canada. This means having a PR Card. However, if you aren’t a Canadian permanent resident, it doesn’t mean you can’t get a mortgage with a Canadian lender. You may still be able to get a mortgage as a temporary resident. It just means having fewer mortgage options to choose from.

Lenders also generally want you to have arrived in Canada less than five years ago. The reason for this is that, in the lender’s eyes, this is enough time for you to have financially established yourself in Canada. This should be plenty of time to build a good credit score in Canada.

Furthermore, lenders want you to be able to provide some form of credit. Some lenders accept credit from international sources. If you’re coming from the U.S., it’s a lot easier to use your credit history compared to somewhere further away.

If you’re not able to provide that, lenders will generally accept a credit equivalent, even if you have limited to no Canadian credit history. For example, many lenders will accept utility and cellphone bills in lieu of actual credit in Canada.

How to Get a Newcomer Mortgage in Canada

Getting a newcomer mortgage in Canada isn’t hugely different from getting a mortgage in Canada if you were born and raised here. You still need to follow the same basic steps, such as getting pre-approved and hiring a real estate agent.

You’ll want to spend a some time on credit building. A mortgage represents a lot of money, so lenders won’t just approve one for anyone, unless you have a steady track record of making payments on time.

Let’s look at the steps you need to follow in order to get a newcomer mortgage:

Step 1: Determine How Much You Can Afford

Before looking at properties, it’s important to determine how much you can afford to spend on a home. This can save a lot of time and heartbreak. You wouldn’t want to spend time looking at homes outside your budget. By knowing how much you can afford to spend on a home, it helps narrow down your choices of homes. You can use filters to search for the types of homes that meet your needs and wants at a price you can afford.

Getting pre-qualified doesn’t have to take a long time. You can use many of the home affordability calculators out there to figure out how much you might be approved to spend on a home. This will give you a rough idea, so that you can then start saving up enough money to meet your home purchase price goal.

And just because you’re told that you can spend a certain amount on a home, it doesn't mean that you have to. You can decide to spend less on a home. There’s nothing wrong with that, especially if a lower priced home meets all your requirements.

Step 2: Build a Credit History in Canada as a Newcomer

It’s a good idea to start building your Canadian credit history as soon as you arrive. A mortgage isn’t the only thing that you’ll need a Canadian credit history and score for. By taking the necessary steps to build a Canadian credit history, it will make your life a lot easier later on. You won’t need to provide as many documents to get approved, making the approval process a lot smoother and more straightforward. You also may not need to go through a lender’s ‘New to Canada’ program, opening up a lot more mortgage lending options to you.

A simple way to establish a credit history in Canada is by opening accounts here, like a cellphone or utility account.

An even better way to build credit is by signing up for a credit card and using it responsibility. This means paying off your balance in full and on time every month.

If you are pretty new to Canada, you might not qualify for a traditional credit card straight away, so it’s a good idea to start out with a secured credit card. A secured credit card works like a traditional or unsecured credit card in every way. The only difference is that you’re required to make a security deposit when you open a secured credit card. The lender holds onto your deposit to use to pay off your balance if you stop making your payments in the future.

Step 3: Bank versus Mortgage Broker

Your first instinct may be to walk into the bank where you have your chequing account to request to speak with a mortgage specialist, but this isn’t always the best choice.

When taking out a mortgage, it’s a good idea to seriously consider working with a mortgage broker. The great thing about a mortgage broker is that a broker can save you time and money by shopping the mortgage market for you to find the best mortgage option. Brokers typically work with dozens of lenders, so instead of you having to apply with each one and potentially hurting your credit score, a broker can suggest the ones that would be the best fit, saving you time and helping preserve your credit score in Canada.

Mortgage brokers don’t typically charge a fee. The service of a broker is completely free to you (the broker is paid by the lender for introducing you as a client). That’s why brokers are such a great option and should be at the top of your list next time you are looking to take out a mortgage.

Another bonus is that a broker may have access to ‘New to Canada’ programs that aren’t available to the general public.

Step 4: Get Pre-Approved for a Mortgage

Once you’re more serious about wanting to buy a home, you’ll want to get pre-approved for a mortgage. This is a more accurate assessment of your finances than a mortgage pre-qualification. A mortgage pre-approval gives you a better overall picture. Not only will you want to get one for your own peace of mind, but most realtors also ask you for one before they’ll start working with you.

When you get pre-approved for a mortgage, you’ll know how much you can afford to spend, assuming everything stays the same. That part is key. If anything changes (i.e., your income, credit, debts, etc.), it’s important to inform the mortgage professional that you’re working with right away, as it could impact how much you can afford to spend on a property.

You can also potentially lock in a rate for 3 or 4 months. This acts as a guarantee and protects you in case rates were to go up while you’re shopping for a home. If that happens, you’re guaranteed the rate you were offered.

Step 5: Hiring a Real Estate Agent

Once you have been pre-approved for a mortgage through a mortgage broker, it’s time to decide the real estate agent you’ll be working with.

Real estate agents play a crucial role in the home buying process. A good agent will sit down with you to figure out the type of property that you’re looking for and search for homes that meet those needs on your behalf.

The great thing about a real estate agent is that when you’re buying a home in Canada, you don’t have to pay for their services directly. It’s the home seller that pays the agent’s commission. 

Once you find a property that you’d like to buy, the agent can help you make a home offer. Just because you have been pre-approved, it doesn’t mean that you’re guaranteed mortgage financing. That’s why it’s still a good idea to consider including the condition of financing in your offer, to fully protect yourself.

What Documents Do You Need to Apply for a Mortgage as a Newcomer?

The list documents needed for new Canadians to get mortgages are similar to those born in Canada, with a few additions. For example, you might need to provide some supporting documents in lieu of a long credit history.

Here are some of the documents new Canadians can be expected to provide.

• Proof of Canadian permanent residence (i.e., a PR Card) and/or a valid Canadian work permit

• Letter of employment and most recent pay slips

• 90-day banking transaction history for down payment funds

• Purchase Agreement and MLS Listing

• A minimum of three months of employment history

• In lieu of an established Canadian credit history and score, proof of rent payments to a landlord, payment of cellphone and utility bills, etc.

• Letter of reference from a financial institution

• Foreign credit report and score

Mortgages Programs For Newcomers to Canada

As a new Canadian, you’ll be happy to know that each of the big banks offers mortgage programs geared towards newcomers. Whether you are newly arrived in Canada with no credit history, or you’ve been here for a while, there’s a mortgage program for just about everyone. Each mortgage program varies slightly, so it’s important to read the finer details before signing on the dotted line.

CIBC Newcomer to Canada Program Mortgage

CIBC offers three mortgage programs for New Canadians.

1) CIBC Newcomer to Canada Program Mortgage

This mortgage is for new Canadians with limited Canadian credit history, who have sufficient Canadian income to show that you can afford the mortgage payments. You must be Canadian permanent resident for five years or less to qualify for this program.

2) CIBC Newcomer to Canada PLUS Program Mortgage

This mortgage is if you’re a new Canadians or a Canadian citizen who was living abroad and you now live permanently in Canada. Reestablishing your career in Canada can be challenging. In recognition of this, CIBC doesn’t require that you have any Canadian credit history to be able to apply. You must be a temporary resident and have a valid Canadian work permit for 12 months or longer to qualify for this program.

3) CIBC Foreign Worker Program Mortgage

This mortgage is for new Canadians who have valid Canadian work permits. You’re able to qualify for this program, even if you lack permanent residence in Canada or you don’t have any credit history in Canada. You do need to meet the minimum down payment requirements, have your credit approved by CIBC and provide acceptable income verification documents to qualify for this program.

RBC Mortgage for Newcomers Program

RBC offers competitive mortgage financing options for new Canadians.

A lack of Canadian credit history is a barrier to homeownership for many new Canadians. With RBC you don’t need any Canadian credit history to qualify, making the process of homeownership a lot easier.

RBC promises a quick and easy mortgage approval process. RBC offers mortgage pre-approval rate holds good for up to 120 days for new Canadians. If rates go up, you’re guaranteed your existing lower rate. If rates go down, you get the lower rate. It’s as simple as that.

Similar to a standard mortgage, if you’re able to put 20 percent down, you can qualify for a conventional mortgage and stretch the amortization period out to 30 years to make the payments more affordable. If you don’t have 20 percent saved, you’re limited to an amortization period of a maximum of 25 years.

In order to put the minimum down on a home, RBC requires that you have a two years of Canadian employment history. If you lack that, you may still be able to qualify if you have a job in Canada and you’re willing to make a more sizable down payment, usually of at least 35 percent down.

Scotiabank StartRight® Mortgage Program

Scotiabank offers two mortgage programs for New Canadians.

Scotiabank StartRight® Mortgage Program – Temporary Residents

This mortgage is for if you’re a temporary foreign working or international student and you want to buy a home in Canada.

To qualify you can’t have Canadian permanent residency. You must be able to provide a valid Work Permit 1442, Canadian Employment Authorization Form, or a letter from your current Canadian employer verifying that you aren’t required to get a work permit.

You and anyone else on the application (i.e., your spouse) must not own any other Canadian real estate, although you aren’t required to sell your primary residence in your home country.

You can’t have any negative credit history.

If you’re a diplomat or someone who’s politically appointed and doesn't pay Canadian income tax, you’re not eligible for this program.

You’re able to qualify with as little as five percent down under this program, with mortgage default insurance. When putting at least 20 percent down, you’re able to choose an amortization period of up to 30 years.

You may be required to put a minimum of 35 percent down if your mortgage is uninsured (i.e., a 30 year amortization, or a purchase price of $1 million or more).

If the down payment is coming from a foreign source, the funds must be in a Canadian bank account a minimum of 30 days before closing. Some lenders need them in a Canadian bank account at least 90 days ahead of time. If the down payment coming from a foreign source is $1 million or more, because it’s such a large sum of money, you will be asked to provide documentation to confirm the source of the funds.

Scotiabank StartRight® Permanent Resident

Scotiabank has a couple programs for Canadian permanent residents.

Under the Equity Offset program, you can qualify to borrow more mortgage funds by showing that you have at least 12 months of liquid asset funds to cover the principal, interest, taxes and heating of the property you want to buy. This excludes any funds you’re going to use towards your down payment. If you’re in the middle of retraining in Canada and earning less than you normally would back home, you may still qualify under this program.

Under the High Net Worth program, you can qualify to borrow more mortgage funds by showing that you have at least $250,000 in liquid assets at a Canadian financial institution. This is above and beyond any funds you were planning to use towards the down payment on the property you intend to purchase. This program is ideal if you’re a new Canadian with significant net worth that you’re bringing into Canada and may not be working here or earning much income here. As such, you can use your Canadian liquid assets to qualify in lieu of having Canadian income. You must be able to show at least three months of statements for each bank account or investment account you want to use towards this program.

TD Mortgages for Newcomers

If you are a permanent resident and have been in Canada for five years or less, you can qualify for a mortgage with TD under its New Canadians program. You’ll need to provide standard proof of your Canadian permanent residency, such as a Canadian PR Card.

TD offers all its standard mortgage features for new Canadians, including the ability to choose your mortgage payment frequency and make lump sum payments.

Don’t let a lack of Canadian credit history deter you. You can qualify under TD’s new Canadian program, even if you don’t have any Canadian credit history.

TD also offers mortgages to new Canadians who are temporary residents. TD will want to see a temporary permit as proof.

HSBC New to Canada Mortgage

As a new Canadian, HSBC promises to let you keep your foreign credit history to make obtaining a mortgage in Canada easier.

In fact, HSBC lets you open a Canadian bank account and establish ties to Canada, even before arriving here. Having ties to Canada can help make your mortgage application that much stronger here.

HSBC offers all the same great mortgage features for new Canadians as its standard mortgages, including prepayments and your choice of payment frequencies. You may also be eligible for HSBC’s same great cash back offers.

You may qualify for a mortgage at HSBC, even if you’re an expat.

BMO Newcomers to Canada Mortgage

BMO’s NewStart program is its mortgage program geared towards new Canadians.

BMO makes it easier to build a credit history in Canada, something vital when you’re applying for a mortgage. You can apply for a credit card with BMO to build a credit history, even if you lack a Canadian credit history.

As a new Canadian, what’s great is that you can qualify for BMO’s standard mortgage products, including the ReadiLine, BMO’s readvanceable mortgage. This is BMO’s mortgage and home equity line of credit that increases in credit limit as you pay down your mortgage.

BMO offers the longest mortgage pre-approval rate hold out of any of the big banks. Enjoy a 130 day rate hold, even if you’re new to Canada. This gives you even more time to get used to your new life in Canada and find a new home here.

How Much of a Down Payment Do Newcomers Need to Have?

The down payment requirements for newcomers to Canada isn’t significantly different from someone born in Canada. The amount you need to put down on a home mainly depends on how strongly tied to Canada you are, and this comes down to your residency status.

If you’re a permanent resident, you may be able to put down as little as five percent on a home (on a home priced below $500,000). On homes priced above that amount, you’d need to put down more. When putting less than 20 percent down, you’re required to take out mortgage loan insurance with a mortgage insurer like CMHC.

If you’re a temporary resident or a non-permanent resident, since you don’t have as strong ties to Canada, lenders require that you put more down. You’ll need to make a down payment of at least 15 percent on a property. If you’re buying a home and taking out a conventional mortgage (you are putting at least 20 percent down) and lack a Canadian credit history, many lenders require that you put at least 35 percent down.

The Bottom Line

Getting a mortgage in Canada as a newcomer isn’t so different from the way a born-and-raised Canadian would access a mortgage. There are a range of newcomer mortgages available, allowing you to purchase a home without a lengthy Canadian employment and credit history.