04 Nov The Best Mortgage Options for Newcomers to Canada

The mortgage process can be daunting for any homebuyer. But it’s even more complicated if you’re a newcomer to Canada. In addition to all the usual considerations like interest rates and amortization periods, new Canadians might also need to research whether they qualify for government-backed mortgage programs. Moreover, newcomers may not have the same credit history as someone who has lived in Canada for several years. Even if your credit is excellent, lenders will want to see that you have an established record of paying rent on time and making other financial obligations before granting you a mortgage. Luckily, there are a few different mortgage options available to new Canadians that make it easier than ever to buy a home. Read on to learn more about these great mortgages and see how much money you can save with the help

What is a Mortgage?

A mortgage is a loan granted by a financial institution to help you buy a house. The bank will provide you with a certain amount of money, which you’ll pay back over the course of several years, with interest. With a standard mortgage, you’ll have to make a down payment of at least 5% of the total house price. However, if you’re a first-time homebuyer and you don’t have a verifiable track record of steady income, you’ll likely have to make a down payment of at least 10%. The rest of the money you need to buy a house will be provided to you as a loan. When you purchase a house, you’ll sign a legal contract called a mortgage agreement. This agreement states that you promise to repay the amount borrowed from the bank plus interest. If you fail, your lender has the right to repossess your house.

CMHC Mortgage

The Canada Mortgage and Housing Corporation (CMHC) is a government-owned corporation that helps Canadian homebuyers finance their purchase. CMHC offers a variety of mortgage programs, including a mortgage designed for newcomers to Canada called the Immigrant Mortgage. This government-backed mortgage program is available to permanent residents, foreign nationals. Even though it’s designed primarily for new Canadians, this mortgage also makes sense for anyone who wants to keep their costs down. Why? Because the CMHC Immigrant Mortgage has one of the lowest interest rates available. Plus, it has a higher loan-to-value (LTV) ratio than other government-backed mortgages, which means a smaller down payment. Let’s say you’re a newcomer to Canada and you’re interested in this mortgage, you’ll need to prove that you make a decent income and have been employed for at least one year. You’ll also need to show that you have a good credit score.

RRSP Mortgage

Like the Immigrant Mortgage, the RRSP Mortgage was designed to help new Canadians get into the real estate market. It’s also a government-backed mortgage. But unlike the Immigrant Mortgage, the RRSP Mortgage is only available to a few select people. To be eligible for this mortgage, you must show that you have a strong credit history and a solid history of meeting financial obligations. Even though the RRSP Mortgage is available only to a select group of people, it’s still a good option to consider. Like the Immigrant Mortgage, it has a low interest rate and a higher LTV ratio than many other government-backed mortgages. Plus, the RRSP Mortgage is relatively easy to qualify for since it doesn’t require a down payment. However, you will have to pay for mortgage default insurance, though it won’t cost as much as the CMHC premium for the Immigrant Mortgage.

The Bank of Canada Option

The Bank of Canada Option gives newcomers to Canada a chance to purchase real estate using funds from their own savings. To do this, you’ll withdraw money from your personal savings account and put it towards the down payment on your home purchase. This is risky, though, because if the value of your savings account drops, you’ll have less money towards your mortgage payment each month. But if your savings account gain value, you’ll have to pay it back. How much money you can withdraw from your savings account depends on a few factors, including how long you’ve been a Canadian resident and your income level.

VA Loan

VA loans can help active and former military personnel, reservists, and their spouses buy a home. A VA loan is a mortgage loan that allows you to finance 100% of the purchase price of a home without any down payment or mortgage insurance. Because VA loans are guaranteed by the U.S. Department of Veterans Affairs, they are a type of government-backed mortgage. If you’re a veteran who served during a time of war or hostilities and you meet the eligibility requirements, you may be able to take advantage of this great mortgage option.

Conclusion

The mortgage process can be daunting for any homebuyer. But it’s even more complicated if you’re a newcomer to Canada. In addition to all the usual considerations like interest rates and amortization periods, new Canadians might also need to research whether they qualify for government-backed mortgage programs. Moreover, newcomers will likely have less credit history than someone who has lived in Canada for several years. Luckily, there are a few different mortgage options available to new Canadians that make it easier than ever to buy a home. The Bank of Canada Option, the VA Loan, and the RRSP Mortgage are all government-backed programs that provide low-cost financing for homebuyers.

We here at Capital Mortgages in Ottawa look forward to assisting you with all your Ottawa mortgage refinancing needs. Contact us today by calling us at: 613-228-3888 or email us direct at: info@capitalmortgages.com

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