1 Jan, 2023
getting a non resident mortgage in canada

Updated January 2023

On January 1, 2023 a new law came into effect in Canada to help ensure the residential property market remains accessible and affordable for Canadians. 

The law essentially prohibits foreign buyers from buying residential properties for investment purposes for two years; however, foreign nationals may still purchase vacation homes, mobile homes and recreational properties such as cabins or cottages. It also allows international students and foreign workers that have been present in Canada for a certain number of years, or are granted temporary resident status, the opportunity to purchase one residential property if they intend to become permanent residents of Canada. 

Lastly, those such as refugee claimants, diplomats, consular staff and members of international organizations living in Canada can continue to buy properties without further restrictions. Residential property purchase exceptions have also been provided for areas with lesser populations.

Please take into account that the information presented below in this blog doesn’t apply for the moment. Contact us for more information on the current laws and regulations. We can provide you with the most up-to-date information to ensure you remain in compliance with the law.

The Post-Pandemic Housing Market In BC 

Despite high real estate prices, ineffective regulation, and a lack of unbiased info, Canada continues to attract a large volume of real estate deals even following the Covid-19 pandemic. 

But with so many buyers investing in a wide range of residential, commercial and industrial properties, can Canadian non residents get a piece of the pie too? In today’s blog, we’ll discuss what mortgage options non resident buyers have in Canada’s current housing market.

British Columbia’s real estate market may have its share of downsizes, but the pluses are too good to ignore. The cities are beautiful and clean, the countryside is green, and getting a Canadian residency is a breeze thanks to the ease of legal requirements. 

All these positive aspects have turned BC into one of the most desirable real estate markets in Canada, making it a great location for those who live here without citizenship. It’s no wonder why the housing market in BC continues to stay competitive, even following the COVID pandemic.

With the current real estate high prices being likely fueled by a post-pandemic boom, the housing market has seen an increased number of deals in the past few months.

Other than these, there’s a significant buying demand based on non-citizens’ foreign money, with much of it coming from mainland China and the United States.

Metro Vancouver Rising Real Estate Costs 

As David Ley has observed, over the last few decades, Metro Vancouver has become similar to Hong Kong, Singapore, London, and Sydney in regards to housing costs. 

These high prices are fueled by high immigration-driven population growth and foreign investors. 

But apart from wealthy foreign buyers purchasing luxury properties in cash, there are also many non residents in need of getting a home loan to buy a house.

Who can be considered a non resident?

Anyone who lives most of the time in another country and only spends time in Canada sporadically.

Anyone who has stayed in Canada for less than 183 days in a tax year.

As a non resident who’s looking to buy a property in Canada in cash, you’ll have to provide a deposit, which is usually 5%-10% of the purchase price of the property. That has to be done within 24 hours either in the form of a bank draft, money order, or certified cheque from a Canadian Bank.

But if you need to take a loan, in the next few sections, we’ll explain the various types of mortgages available for non residents in Canada, the conditions that need to be met, and the steps to apply for a loan. We’ll also discuss what type of lenders to approach and the costs involved in getting a home loan if you are a foreign national.

Can You Get a Mortgage As a Non Resident Or a Non Permanent Resident?

Non resident buyers are met with few restrictions when looking to apply for a mortgage in BC, Canada. It’s worth mentioning that when we refer to Canadian foreign nationals, we are not only talking about people living abroad.

Canadian banks consider citizens of Canada who haven’t resided in Canada for more than half a year to be non residents too. Thus these individuals, together with resident aliens, will also be subject to the 15% non resident speculation tax. 

In addition, if you are a foreigner looking to buy a property with a Canadian permanent resident, banks will still treat you as a non resident and make you subject to the same requirements when applying for a mortgage, including a higher down payment. 

Non Resident Home Loan Taxes And Rates

Regarding tax implications, apart from the non resident speculation tax, after taking possession of your property, you’ll need to pay land transfer taxes, as well as yearly property taxes. Both of them can be significant and depend on the size of your residential property in Canada. 

For a more accurate estimation, you can check the British Columbia Property Tax Calculator.

Whether you choose a fixed rate, variable, repayment, or interest-only rate to approve a home loan, most A-lenders require non residents to provide a minimum down payment of 35%. The good part is that non residents are eligible for the same interest rates as Canadians, provided they meet the mortgage loan eligibility criteria.

To get a mortgage in BC, Canada, as a non resident, you need to choose a lender and provide the following:

  • 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.

The problem when working with A-lenders is that obtaining a home loan in BC, both as a resident and a non resident, can be hard right now.

Mortgage lenders want to know everything about you these days to make sure that you can keep up with your mortgage payments. This includes your age, marital status, income, if you own other property, and so on. What’s more, each Canadian bank has its own rules. Some are less strict, while others require a different down payment according to your home of residence.

But what to do if you don’t comply with B-20 guidelines? 

non resident mortgage

Alternative Non Resident Mortgage In British Columbia

As a non-resident, applying for a home loan in Canada when you don’t fit the bank’s guidelines can turn into an impossible endeavor. 

Please keep in mind that the federal government’s ban on new foreign ownership of residential property applies to alternative mortgages too. This means that, as a non-resident, you may still have difficulty finding a mortgage in Canada, even if you’re using an alternative lender. 

To avoid hardship and learn more about the categories of foreigners that can still buy property in Canada, it’s always recommended to work with a professional Canadian mortgage broker. 

Your broker will be able to answer all your questions and handle most of the paperwork for you. They’ll also help you access private lenders and alternative forms of lending such as a home equity loan if you already own property, and compare the best interest rates in BC. 

You’ll get all the information you need from them regarding the standard financials, extra charges, and the taxes involved. Overall, a broker will help you have a much stronger understanding of the terms and conditions before signing.

If you don’t qualify with the banks due to a low credit score or a poor credit history,  B- lenders won’t ask you to provide a ton of paperwork and will only require:

  •  35% down payment from non- residents
  •  40% to 50% down from Canadians that live abroad but do not reside in Canada — or those that don’t file taxes in Canada

The great part is that, as of recently, if you are non-resident with ties to Canada you may receive up to 75% with standard pricing in the Private Mortgage market. According to previous guidelines, if you were a non resident, the max LTV would have been 65% loan to value.

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    Wrapping Up 

    If you are a non resident looking to get more advice regarding mortgage options in BC, don’t hesitate to get in touch. I have all the right connections here so no matter if it’s providing you with a lender for your mortgage, with a lawyer to sign the transfer of real estate, or with finding the right insurance for your property, I can help you with all. 

    I would be more than happy to learn about your current situation, answer all your questions, and lead you on the path to homeownership in Canada. 

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