If you’re new to Canada, you’ll find the mortgage market is a little different. In order to get you started with the process, here are a few helpful tips that every newcomer should know about qualifying for a mortgage in Canada.

You must meet some basic requirements before you can apply for a Canadian mortgage:

  • You must have immigrated or relocated to Canada within the last 60 months
  • 3 months minimum full time employment in Canada (borrowers being transferred under a corporate relocation program are exempt) 
  • Borrower required to have permanent resident or landed immigrant status, or a valid work permit 
  • For borrowers with only 5% down, down payment must be from own resources
  • For borrowers with more than 5% down payment, anything over the initial 5% may be gifted from an immediate family member or from a corporate subsidy 
  • All debts held outside of the country must be included in the total debt servicing ratio (Rental income earned outside of Canada is to be excluded from the GDS/TDS calculation) 
  • Guarantors are not permitted 
  • Foreign Diplomats who do not pay tax in Canada are ineligible for this program

For more details on each of the programs offered to newcomers by the three mortgage insurers, check out their websites:

Lenders often offer discounts to informed and savvy borrowers and charge normal or higher than normal rates to uninformed newcomers.

The Bank of Canada’s 2011 study on price discrimination showed that lenders do this as a matter of practice. Because the Canadian mortgage market is fully backed by a government insurance system, lending decisions are not driven by a traditional risk-based pricing model.

For this reason, it’s not the risk that you pose to the bank that may affect your interest rate but rather how good a shopper you are.

Don’t pay the posted rate. The posted rate you see is not always the one you pay. Lenders are often willing to negotiate that rate, but no lender will tell you this upfront. This doesn’t mean the bank is trying to scam you, it just means that you need to understand the rules of the marketplace. Like in many countries, prices aren’t absolute.

Contract terms can be flexible. For example, if a lender offers you a low-interest mortgage, make sure you understand what the features of that mortgage are – is it portable, what are the pre-payment privileges and how is the prepayment penalty calculated if I go beyond the privileges?

Pre-payment penalties are a stipulation on closed term loans. It gives the lender some assurance that he will profit from the transaction. If you ask for no pre-payment penalty, then you are going with an open term with a much higher interest rate. Depending on your plans, this may be worth it for the added flexibility.

In Canada, you can take your mortgage with you if you move, this is called portability. These provisions don’t come with all contracts, however, so you should ask for it if it’s important to you.

Hire a broker. As a newcomer, the process of negotiation may seem daunting. If you’re uncomfortable or if you’re just not a good negotiator, consider hiring a mortgage broker.

Brokers will shop the marketplace for you. We don’t work for banks. Instead, we act as a liaison between you and the lender. 

If you would like more information or would like to contact me, please refer to my website.