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Canadian mortgages for expats and non-residents

In this overview, we will highlight for you some key information to be aware of, enabling you to get started on the process of securing a mortgage in Canada.

Written by Lauren Ross on 6 July 2020

Canada is a great location for those who are looking to buy property overseas. As well as having beautiful countryside, you are also met with clean, modern cities throughout and in between. Canada is an extremely popular place with expats from the US and the UK to take residency due to the ease of legal requirements to gain acceptance.

Non-residents are met with very few issues when buying property in Canada because they have the same ownership rights as local residents and citizens. However, when purchasing overseas and planning on applying for a Canadian mortgage, you should always speak to a professional to allow you to not only obtain the information you need regarding the standard financials, but to have a much stronger understanding of the extra charges and taxes involved.

What tax is involved in my Canadian purchase?

To put it simply, it is all circumstantial. Different parts of Canada alter the amount of tax you will need to pay as a non-resident. If you are purchasing a home within the “Greater Golden Horseshoe Region”, you will be subject to non-resident speculation tax.

The Greater Golden Horseshoe Region (GGH) is a list of geographical areas and cities that are included in the horseshoe-like shape that is formed on a map of southern Ontario. Cities such as Orillia, Hamilton and Toronto are included in the GGH region. A quick internet search of your chosen property location will be able to show you if it is included within this.

People living outside the GGH may also be subjected to a non-resident investor tax although the province of Quebec has yet to implement this tax.

The non-resident speculation tax was introduced by the Government of Ontario, meaning from April 2017, you would be subject to a charge of between 15-20% tax on your purchase if you are not a permanent resident or citizen.

Types of mortgages and understanding the figures

Canada offers many types of mortgage, allowing you to decide what is the best option for you. Whether you chose a fixed rate, variable, repayment or interest-only, every situation is unique and buying overseas will never be as straight-forward as it would be in your main country of residence.

Knowing your budget is important going into this process and starting the application as early as possible will allow you to have a much clearer understanding of where you stand financially.

Regardless of the mortgage type that you chose, you will need to have a down payment for the property you want to purchase. The required amount for this will vary based on your country of residence. Lenders require larger down payments from non-Canadian residents than they do from permanent residents.

As a US resident, your deposit would have to be a minimum of 20% of the total purchase price. As a resident of any other country, your down payment would have to be a minimum of 35% of the purchase price.

For non-Canadian residents, lenders currently offer a maximum loan-to-value (LTV) of 65% (although US citizens in Canada may be able to borrow up to 80% loan-to-value), but would still ultimately be dependent on your credit history, your lender and the type of mortgage that you have chosen. This is usually over a maximum time period of 25 years.

Another crucial figure to consider before jumping to applications and offers is to invest some time into learning what the cost of insuring the type (and size) of house you plan on buying to ensure you can afford it. The prices for home insurance in larger expensive cities (such as Vancouver and Toronto) is quite high and going into the purchasing process with an understanding of this will avoid an unpleasant shock later down the line. Home insurance is essential to be able to get your Canadian mortgage, so getting some estimated quotes on the property you want to buy will help you expect how much it will be.

What documents do non-residents need to provide for a Canadian mortgage?

As a non-resident, documentation is needed to qualify for a mortgage in Canada. This includes:

  • Proof of income (employment contract, tax returns and pay slips)
  • Bank statements for proof of down payment (dating back 90 days)
  • A letter of reference from a bank outside of Canada
  • An international credit bureau report or six months of banking statements
  • A Canadian bank account that the mortgage payments can be withdrawn from

Get advice from a Canadian mortgage specialist

It is always recommended to speak to a professional mortgage broker when buying overseas. Doing this means that you will be able to compare the best interest rates in Canada, due to your broker having access to hundreds of lenders over multiple provinces.

This also means that your mortgage broker can explain your agreement in detail to ensure that you have full understanding of the terms and conditions before signing, whilst also handling the majority of paperwork for you.

Request a free introduction to an independent mortgage advisor that will:

  • Conduct a free introductory consultation to understand more about your situation and offer immediate guidance of your options
  • Ask you to complete fact-find questionnaires to establish your best options and provide advice on how to proceed
  • Provide access to mortgages in over 150 countries including France, UK, United States, Italy, Germany and Spain.