The New to Canada Mortgage is designed for new citizens of Canada. It allows you to finance a home purchase. However, there are some conditions to qualify.
Welcome to Canada. Throughout our ten provinces and over 38 million citizens, you’ll find some wonderful places to live. Not only in big cities like Toronto and Vancouver but also areas well off the beaten path.
The good news is our nation helps new residents who want to purchase a home. This is done through the New-to-Canada program. Read further to find out more about its qualifications, and it’s benefits to you.
What is the New-to-Canada Program?
The New-to-Canada program helps emigrants establish their financial needs to begin a new life in the country. Several financial institutions offer a form of this program to create chequing and savings accounts. Mortgage brokerages, including Cashin Mortgages, have New-to-Canada programs to take the next steps into homeownership.
Standard Mortgage vs. New-to-Canada Program
Whether or not you qualify for a New-to-Canada Mortgage depends on your newcomer status. You receive a typical mortgage if:
- You are a permanent resident of Canada, have a good credit score (from a national or international agency), and can provide a down payment at or greater than five percent of the home’s cost.
- You aren’t an official resident but have a work permit and an application submitted for permanent residency. You must also have a good credit score and 5% or more for a down payment.
You qualify for a New-to-Canada Mortgage if:
- You’re a permanent resident with below-average credit that can still provide a down payment of 5% or more.
- You’re not a permanent resident with any type of credit and you can provide a minimal 10% down payment.
Should you qualify for a typical mortgage, then you could go through a regular broker to start the pre-approval process, such as Cashin Mortgages Ultra-Low Rate Mortgage. If you fall under the guidelines for the New-to-Canada program, then you go through a lender that works with the respective offering agencies such as Cashin Mortgages.
If you are not a current resident of Canada and can’t provide at least 10% down on a home, then you don’t qualify for either type of mortgage.
The Next Steps
Once you determine your eligibility, the next step is to get your finances and paperwork in order. It’s best not to start looking for a home until everything is ready for submission, especially if you’ve decided to become a permanent Canadian resident.
The qualifications aren’t much different than if you were getting a mortgage from a regular broker. Nevertheless, the agencies that are part of the New-to-Canada program take a closer examination of your paperwork before moving forward. Thus, consider the following steps.
Establish strong credit
Credit works one of two ways. On the one hand, it’s a convenient method to buy something now and completely pay it off later. On the other hand, it becomes an enormous albatross of unpaid debt that hangs around your neck. It’s this latter situation that stops you from obtaining any type of mortgage.
Take care of your credit from the outset; it’s more than paying off your Visa card each month. You must keep up with your rent, utility, and other bills to minimize their impact.
On top of this, you must have a steady source of income. This is done through pay stubs or bank statements. Spotty sources of revenue are flagged by mortgage agencies. This could result in higher interest rates or your application being declined.
Another task required to get a New-to-Canada Mortgage is to run a credit report to verify if everything listed is correct. Should there be a discrepancy, then immediately address it to the reporting agency to get it resolved.
If you’re new to the country and don’t have a strong credit history, then you must provide alternative supporting documentation. For instance, a valid work permit, proof of income, and information concerning payments made to a landlord. A letter of reference from another financial institution or an international credit report is also acceptable.
Save for the down payment
Though you’re a welcome new resident to Canada it doesn’t mean you can purchase a home without a down payment. If you’re a permanent resident, then you need to place at least 5% down under the New-to-Canada program. If you aren’t a resident but have a valid work permit, then the down payment is at or more than ten percent.
Overall, a larger deposit is better than the minimum. Not only does it lower your monthly principal but also helps get you a better interest.
Putting down 20% on the property’s value stops the lender from adding insurance for a high-ratio mortgage. This is applied to a home loan to protect the lender from missed payments or default. When 20% or more is provided as a down payment, it shows New-to-Canada brokers that you have financial stability.
Amortization and rates
There are two additional items to review before you reach out to a mortgage broker. The first is the amortization period for the home loan. If you end up carrying mortgage insurance due to a minimum down payment, then the maximum term is 25 years. Without this rider attached, this is increased to 30 years.
Amortization is different than the term of the mortgage. This has to be renewed every decade or so to maintain your existing options. The timeframe and payment totals aren’t affected if you renew your term per the broker’s schedule.
The second thing to research is if you want a fixed or variable rate loan. With the former, the interest rate you get at the time of the purchase is locked in for the mortgage’s duration. The exception to this is if you decide to refinance your home loan when interest rates go down.
A variable rate mortgage is based on the fluctuations of interest rates. You pay less monthly if this value goes down. Conversely, your mortgage could be significantly higher if interest rates are increased by the Bank of Canada. In other words, you risk your payments based on market fluctuations.
Seek out a mortgage lender
When you have reviewed and completed the above three tasks, then it’s time to seek out a broker to help guide you through the process and obtain a favourable mortgage rate. Our experienced team at Cashin Mortgages can help you complete the proper paperwork to start you on the path to homeownership. Contact us today and speak with one of our trained professionals on the best ways to get started.