Mortgage Refinance

Canadian Mortgage for Non-Residents

The Canadian housing market continues to be very strong, and its robust economy shows no sign of slowing. In addition, according to the U.S. News, Canada is considered the most livable country globally.

This environment makes owning a home in Canada an attractive prospect for many people, particularly those living outside Canada. Today, we will see some of the most frequently asked questions about buying a home as a non-resident in this beautiful country.

Understanding Mortgages for Non-Canadian Residents

A non-resident of Canada is generally classified as not having permanent status. For example, they may be a citizen of another country living full or part-time outside of Canada, or they may have dual citizenship that includes another country in addition to Canada.

Although there are several benefits to buying property in Canada, you must understand and abide by all Canadian laws regarding foreign ownership if you choose to go ahead with this project. For example, suppose you fail to meet your legal obligations when buying, owning, and selling real estate as a non-resident in Canada. In that case, it can have very negative consequences, including financial penalties and even imprisonment under certain circumstances.

As such, experts recommend consulting an immigration lawyer before making any decisions about property ownership here.

Required Documentation for Buying Property as a Non-Resident

When buying property in Canada as a non-resident, you will need to provide proof of your financial status. However, that may be more difficult if you live outside of Canada for an extended period or you change jobs. You will also need to show that you have access to funds when applying for a mortgage.

In addition to this documentation, you should obtain a pre-approval from a Canadian bank before looking at any properties so that your realtor knows exactly how much they can help you spend when searching for homes. Pre-approvals are usually valid from 60 days up to 120 days, depending on the lender, and it provides clients with a clear idea of how much money they can spend without the additional stress of applying for a mortgage.

Once a property is found, you will need to provide proof that you live outside of Canada, along with your financial documentation and pre-approval letter from a Canadian bank.

Other essential documents include:

  • Proof of citizenship
  • A list of reference people who are either citizens or permanent residents in Canada
  • References from friends or family members who are Canadian residents but not citizens
  • The broker must fill out a property information form

Qualifying for a Mortgage as a Non-permanent Canadian Resident

Even if you are not a permanent resident of Canada, there is no reason that you cannot have a high income and still qualify for a mortgage. The only difference is that your down payment may need 30% or more rather than the 5% that citizens typically need.

Keep in mind that interest rates on mortgages in Canada will fluctuate. It can be difficult to predict what your monthly payments might total over the loan term with any accuracy. That makes it crucial to remain as flexible as possible when looking at homes so that you can leap on any opportunity should the rate suddenly dip below what it was at the time of pre-approval.

What Kinds of Mortgages are Available for Canadian Non-Residents?

Lending institutions offer both closed and open mortgages to non-residents. Closed mortgages have regular payment schedules and regular amortization periods and are paid in full at the end of the term. However, they cannot be pre-paid or refinanced once you obtain them.

Open mortgages can be used for home improvements or other projects because they involve a line of credit that allows you to pay any fees as desired before closing on your property. In addition, the rates fluctuate with market conditions which means that you will have plenty of options for pre-payment flexibility and interest rate management over time.

Mortgage Interest Rates for Non-Residents

The interest rates for non-resident mortgages tend to be relatively high compared to rates available through The Canada Mortgage Housing Corporation (CHMC). However, they are considered riskier and more challenging to assess.

The following information can help you understand the different types of mortgages and their interest rates and fees:

  • Canadian fixed-rate mortgages: The interest rate on these mortgages will be charged at a fixed percentage throughout the life of the loan. As such, your payments will remain constant through any changes in Canadian currency fluctuation or economic climate. These loans tend to come with higher closing costs than variable-rate mortgages, but you do not have to worry about fluctuations in your monthly payment amounts.”
  • Variable-rate mortgages: These loans provide you with greater flexibility, allowing for increases or decreases in your payments based on market conditions. With this mortgage type, there is a possibility that your monthly payment may be higher than it would be with a fixed-rate loan.
  • ARM mortgages offer rates that change over time, and they are often considered riskier investments for lenders than fixed or variable-rate loans. As such, the interest rates tend to be higher for this type of mortgage.”

Closing Costs for Canadian Non-Resident Mortgages

Lenders tend to charge higher closing costs because non-resident mortgages come with riskier conditions and rates than resident mortgages. Additional fees you may need to pay when taking out a mortgage in Canada include:

  • A valuation fee (varies by lender)
  • An appraisal fee (varies by lender)
  • Legal fees (varies by province)
  • Title insurance (varies by lender)

The Bottom Line

Obtaining a mortgage in Canada is possible, even as a non-resident. However, you should expect higher interest rates and more significant fees than those available to Canadian citizens. The key to ensuring that you can afford your price properties based on the current lending environment so that you do not find yourself with an expensive home that you cannot afford due to fluctuating payments.

If you are non residents of Canada and don’t know about Canadian mortgage, then browse Best Mortgage Online for more knowledge on various mortgage available in Canada.