How Non-Residents – including Americans – Can Qualify for a Mortgage in Canada

Vancouver real estate is an attractive option for buyers from all over the world.

With Vancouver’s heightened exposure during the winter Olympics in 2010, and, more recently, a sinking loonie, BC real estate is experiencing something of a renaissance with our neighbours to the south and overseas. Although buying property as a non-resident can be somewhat more involved, the right information will go a long way towards un-complicating the process.

So if you are a non-resident who is interested in investing in Canadian real estate and who would like to qualify for a mortgage, here are a few pointers to get you started.

Eligibility Requirements

As a non-resident of Canada, it is certain that you will be on the receiving end of additional review by your lender, mostly because a non-resident is viewed as a higher risk. The down payment is also higher. Depending on the lender and the country of origin, the minimum down payment of 35 per cent will be required, in comparison to Canadians who will often come into the market with just five to 10 per cent.

As with any mortgage, your lender will require documentation, beginning with an international credit report from your country of origin. Obtaining credit for Americans tends to be the easiest and quickest process, while international bureaus can take much longer to obtain. Income verification documents will also need to be provided and, if in foreign currency, must be converted into Canadian dollars.

Given the income supports the loan, most, US residents can qualify for up to 65 per cent of the loan. To that end, all documents provided must be in English or French and, if translation is required, it must be done by an independent party and notarized. If standard income verification is unavailable, most banks will require a larger down payment of about 50 per cent and confirmation of liquid assets equal to or greater than 30 months of PITH (mortgage principal, interest, taxes and heat) to be held at the bank in Canada for a minimum of 30 days before the closing date.

Know Your Time Limitations

As with Canadians who do not hold work visas for the US, those who wish to spend time in Canada are generally allotted duration of six months under a visitor’s visa. Where one may run into complications, however, is the amount of time they are required to spend outside Canada before returning to extend visitor status.

As most of us know from the amount of media coverage on foreign buyers of Vancouver real estate, non-residents may keep a home in Canada without applying for residency. However, for US residents, since the immigration act does not stipulate US residents must leave for six months before being able to return, there have been many examples of those who spend just a few days or weeks in America before coming back. This can become a somewhat contentious issue as it is largely up to the immigration officer to decide. Many legal professionals make it clear that a US resident must retain a permanent address outside of Canada. This requires proof such as a home deed, income tax statements and the proper identification. By keeping solid records of your comings and goings from Canada, you will ensure your ability to enjoy your secondary property here without any complications.

Meet the Taxman

When purchasing real estate in Canada as a non-resident, home buyers are subject to the same fees and taxes as Canadians. Depending on the jurisdiction where the property is located, non-residents may be asked to pay higher property or land transfer taxes, as well as different capital gains when they sell a property. If there is a property you are interested in buying, it is imperative to ask these questions beforehand.

If you plan on renting a property here in BC, or using it as an investment property, you may be subject to a 25 per cent tax on rental income, which is typically taken off the monthly rent. There are possibilities for this amount to be reduced by claiming expenses related to the property, although every situation is unique. An experienced mortgage broker and tax accountant can help with the details.

Mortgages for Non-Residents

In terms of non-resident lending, only a major bank would be capable of granting the mortgage. Although some of these major banks will base the mortgage application on current rental income, the vast majority are looking for the borrower to be income-qualified. It is also important to note that the mortgage rate may be slightly increased depending on the lender to cover the additional risk of lending to a non-resident.

Looking at the specific program of one major bank, they will consider a maximum of one property only, and those eligible will be held to a maximum amortization of 25 years. In addition, properties located in the Greater Vancouver and Greater Toronto areas will have a loan-to-value ratio that is 65 per cent of the first $1,200,000 of the property lending value, and 50% of the value over $1,200,000. Properties, which fall outside of these categories, come in at 65% of the first $750,000 of the property lending value, and 50% over $750,000.

Working with Local Professionals

Non-residents of Canada can and should use every resource available to them here in BC for their new home. There are a number of qualified professionals who can help you find a property compatible with your resources, and to help you prepare all your paperwork so that once you have found what you’re looking, you can proceed with ease.

One major difference for the borrower is the fee charged by the broker in the US. For most “A lender” mortgages, Canadian mortgage brokers do not charge fees for setting up the mortgage. Especially if you are not local, it would be beneficial to consult a mortgage broker so they can start the process with you and discuss your options with different lending institutions. 

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