#GoodReads – Mortgage options for newcomers

#GoodReads – “New to Canada? Mortgage options for newcomers” via Canadian Real Estate Magazine.

“…What is a newcomer mortgage?

A newcomer mortgage is a special mortgage product offered by Canadian lenders designed to make it easier for newcomers to Canada to purchase homes despite difficulties they may face. Some common difficulties for newcomers are that they may not have a Canadian employment history, it may be more difficult to prove income and savings, and they may have a limited Canadian credit history. Both your credit history and your employment history play an important role in qualifying for a conventional mortgage, so for newcomers, this can make it very hard to qualify.

In a newcomer mortgage, banks are less strict on these requirements, though there are additional criteria for eligibility that go above what may be required for a conventional mortgage to make up for the lower standards in these other areas.

Different lenders offer mortgages to newcomers, but they do have various different criteria and mortgage terms and are offered under different product names. Some of these include the CIBC Newcomer to Canada Program Mortgage, RBC Mortgage for Newcomers to Canada Program, and Scotiabank StartRight Mortgage Program. Consider working with a mortgage broker to help you find and compare these different programs to see what is right for you…

Who counts as a newcomer to Canada?

The first step is determining if you are a newcomer in the eyes of the bank. Usually, this means someone who has moved to Canada in the last five years. Newcomer mortgages also mostly cater to those who are either permanent residents or temporary residents with work visas. Some lenders may also offer something similar to a newcomer mortgage for Canadian citizens who have lived abroad for a number of years and have a lack of Canadian work or credit history.

Even if you qualify under these rules, you still may be able to get a conventional mortgage if you have two years of employment history in Canada and enough for a 20% downpayment…

Down payments may be larger in some cases

Another area where newcomer mortgages differ is in down payments. If you have not been employed in Canada for at least two years, some lenders will require larger down payments of at least 35% in order to get a mortgage. In order to pay a lower down payment, you will either need a longer employment history or pay to get mortgage default insurance on your loan.

Some lenders will also prevent you from taking a mortgage loan if a portion of your down payment is loaned or borrowed. Lenders may also limit your options for an amortization period, for example restricting you to a period of only 25 years.

Is a newcomer mortgage right for me?

Newcomer mortgages offer a great opportunity to those who would otherwise have a lot of difficulties getting a mortgage. However, they also are a bit more limited than a conventional mortgage. If you are eager to move in as soon as possible, have enough money to reach the financial requirements, and don’t mind the more restrictive terms, this can be a great option for you. However, for those who need more time to save or don’t make as much, it might be more worth your while to wait until you can qualify for a conventional mortgage and save a bit more in the meantime. As mentioned before, it’s highly recommended that you talk to a mortgage broker or financial advisor to find out what is most feasible for your financial circumstances…”

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