A Non Resident’s Guide to Getting a Mortgage in Canada
In this Non-residents guide to getting a mortgage in Canada,
we'll review how to assess the current market, find the right lender, and plan for taxes and down payment. But first, let’s define what a Canadian non-resident is. Simply put, a non-resident is someone who routinely or lives typically outside of the country.
Additionally, if you don’t have any residential ties to Canada and live or stay less than 183 days here, you’re considered a non-resident. Now, the most important question is, can you get a mortgage in Canada as a non-resident? Yes, absolutely! Canada’s real estate market is open to just about anyone—even beyond its borders, regardless of whether you’re a Canadian citizen or not. Here’s what you need to do to get a mortgage as a non-resident:
Assess the Housing Market
First of all, you should know about the current housing market. Like everyone else, you probably know about how the housing market in Canada is continuing to thrive, even more so now, despite the high prices and other challenges. One thing you will have to worry about is competition.
Depending on your current location, whether you’re in the country or not, will determine how good your chances are for getting a mortgage. On top of that, you also need to consider that residents may be more of a priority buyer compared to you.
However, it’s important to note that despite this, there are currently plenty of properties to go around at the moment. Although the housing market may be competitive, take it as a good sign that many good deals are available.
Find a Suitable and Reputable Lender
When you apply for a mortgage in British Columbia, you won’t necessarily be met with a mountain of restrictions. There aren’t many hard rules that prevent you from getting a mortgage. However, the problem lies with finding a suitable lender. During this process, it’s essential to get help from a professional and do lots of research on your own.
There are lenders that have more restrictions for non-residents or do not offer mortgages to them at all. One of the things you will be contending with as a non-resident is a higher down payment, 15 percent non-resident speculation tax, and so on.
Any foreign income will be closely scrutinized, so make sure to prepare your financial statements. Have them translated to English if you live in a country where it is not the main language.
To get a mortgage as a non-resident, this is what you need to prepare:
A 35% down payment
A reference letter from your bank
A Foreign Income Verification Statement, showing assets
A CRA Form T1134, Information Return Relating To Controlled and Non-Controlled Foreign Affiliates.
an employment letter verifying income in Canadian or US dollars
three months of bank statements
A Canadian credit check.
Get Insurance
You are definitely going to want financial protection against theft, fire, and other unforeseen events that may damage your property or personal belongings. On top of that, when applying for a mortgage, lenders are going to ask that you present proof of homeowner’s insurance for your property.
The next most important thing you need is insurance. While it may be harder for non-residents to obtain this, given your position and unique situation, this is a step you won’t want to skip. This protects your property against theft, fire, and other possible unforeseen events.
Additionally, when you apply for a mortgage, lenders will ask you to present proof of homeowners insurance for your property. So it serves a double purpose and increases your chances of getting a good deal. When buying insurance, make sure to obtain several insurance quotes before you commit to one.
Consider Tax Implications
Once you get the mortgage and finally buy the property you want, there are a few things you need to settle. Apart from the non-resident (or foreign buyers) speculation tax, you need to pay land transfer taxes and property taxes. Depending on the size of your property, the amount you pay can be higher or lower.
No matter what type of mortgage you get, most lenders will require that you pay a 20 to 35 percent down payment. You can be happy that non-residents are still eligible for the same interest rates as Canadians as long as they meet the eligibility criteria.
What if your Canadian spouse or co-investor live abroad and you are local? Facing the Speculation and Vacancy Tax (SVT)
First of all, according to the Minister of finance, the foreign buyers tax does not apply to Canadian Citizens irrespective of their tax residency.
What you might be exposed to is another tax which is billed annually. The British Columbia government introduced the Speculation and Vacancy Tax (“SVT”) legislation in 2018. The SVT is an annual tax of 2% of the home value based on how owners use residential properties in major urban areas in BC. The SVT is intended to tax speculators and foreign owners, in an effort to improve affordability of local housing markets
Learn more about it here on the BC government website: https://www2.gov.bc.ca/gov/content/taxes/speculation-vacancy-tax/exemptions-speculation-and-vacancy-tax/individuals/tenancy-requirements
THE BOTTOM LINE
To ensure that the process goes as smoothly as possible, you need to understand where you stand as a non-resident and what documentation you need to provide.
It’s important to note that despite being a Canadian citizen, being classified as a non-resident means you will be treated as a foreigner. Rest assured that doesn’t lower your chances of getting a mortgage. It just makes the process, requirements, and fees a little different.
Here at Level Up Mortgages, we simplify the mortgage journey for new buyers, newcomers, and the self-employed. Want to learn more about mortgages? We can help you! Contact us today to get more information about services and how you can find the best mortgage for your needs.
See what you qualify for or contact Paul to get your pre-approval.
Paul Davidescu (www.levelupmortgages.com)
Level Up Mortgages
604-809-3188
paul(at)levelupmortgages.com
See Our Google Reviews in BC & Ontario: bit.ly/GoogleReviewLUM ⭐️⭐️⭐️⭐️⭐️