Mortgage Solutions for Newcomers to Canada
As a newcomer to Canada, you want to get settled as quickly as possible, and this means purchasing a home so you can put down roots for your family. Because it is such a large purchase and you’ll be making payments on it over time, one of the first things you’ll need to do is qualify for a mortgage.
The typical mortgage charges interest based on rates that the government and Bank of Canada set, as well as the borrower’s credit score, and is usually paid over a period of 25 years. New Canadians may not understand all the details of these loans, so we’ve put this guide together to help you understand the basics and what you’ll need to do to get your mortgage.
How Long Have You Been in Canada?
The amount of time you’ve been in Canada can play a large role in getting your mortgage. Lenders typically like to see that you’ve been living in Canada long enough to be “established”.
For instance, they want to see you’re gotten regular paychecks from an employer in Canada. They want to see what you’ve built up some positive credit history. If you’ve been here for less than a few months, it could be harder to qualify for a mortgage.
As soon as you get to Canada, you should work on setting up your finances so you’re prepared to buy a home.
Tips For Choosing a Bank in Canada
There are a lot of different banking options in Canada. Deciding on the right one for you might seem overwhelming at first, but you can simplify the decision by asking yourself a few questions:
- Do I need a location that’s close to my home? If you’re currently renting, consider where you might eventually want to move to as well as where you currently live.
- What kinds of mortgage services do they offer? Do they have competitive interest rates?
- Does the bank offer any additional services that might be helpful, such as home insurance?
- Do they have any programs or services designed specifically for new Canadians?
- Do they offer other forms of support for immigrants, such as free international money transfers?
Once you start to filter down your options by applying these questions, the decision will start to get easier.
When you’ve chosen your bank, the first thing you’ll need is a checking account. This will allow you to write cheques or use a debit card to access the money you need for your daily living expenses. Savings accounts are for longer-term savings, and the money in them is usually harder to access. You’ll also want to apply for a credit card which you need to start building up a credit score.
Banks That Offer Services For New Canadians
Some institutions that offer mortgage services for new Canadians include:
- RBC Mortgages for Newcomers to Canada
- Bank of Montreal’s Newcomers to Canada Resources
- Scotiabank Mortgage Program for Permanent Residents
- CIBC Welcome to Canada Banking Package
Do These Things to Build Up Your Canadian Credit
Lenders look at your credit history to determine how risky of an investment you are. If you haven’t been living in Canada for a long time, it’s harder for them to know whether or not you’ll behave responsibly with credit.
The best way to do this is by building up your credit score. [link to “# Ways for New Canadians to Build Up a Good Credit Score” article] This can be tricky because a lot of the payments you might normally make – rent, utilities, and cell phone, for example – rarely count toward your credit history, even if you make on-time payments.
The key to building up credit is to use a credit card and/or take out a loan, then make regular, on-time payments. You can avoid fees by charging small amounts on the credit card, then paying it off in full for each statement period. While credit cards can be tricky to get if you don’t have a good credit score, some banks specifically work with newcomers to Canada who are looking to build up their credit here.
How Much You’ll Need to Save For a Down Payment
When you buy a home, you need to have a down payment. This needs to be at least 5 percent of the value of the home, and you need to have the money in a savings account. The lender will check to see if you have this money before they approve your mortgage application.
Because newcomers to Canada don’t have a long credit history, they represent a bigger risk to the lenders. If you’re able to have a high down payment (20 percent or more), then it will be easier for you to get a loan. Of course, that’s a significant amount of money. If you were to purchase a $300,000 home, for instance, you’d need $60,000 in cash for the down payment.
Where Should You Apply For a Mortgage?
Apply for your mortgage through a bank or a mortgage lender. If you’re a newcomer, look for companies that specialize in providing this service to those who are new to Canada. They’ll have more understanding of your situation and how to best serve your needs.
Sometimes, you can get a good deal by going with the bank you already use for your banking or credit cards.
At Sterling Homes, we know how confusing the home buying process can be for newcomers. We want to help you every step of the way. Get in touch with us or call our Online Sales Concierge at 780-800-7594 and see how easy it can be to get started.
Photo credits: depositphotos.com