Can a Non-Resident Get a Mortgage in Canada?

Yes, non-residents can get mortgages in Canada, but it’s not as straightforward as for residents. With Canada being a desirable location for real estate investment due to its stable economy, attractive cities, and excellent quality of life, many international buyers—whether immigrants, expatriates, or even those simply interested in a vacation home—seek to purchase property. However, being a non-resident comes with certain financial and regulatory hoops that need to be navigated.

In Canada, non-resident mortgages are available, but there are specific criteria, higher down payments, and certain limitations that non-residents should be aware of before diving into the Canadian real estate market. Understanding these requirements and nuances is crucial in order to successfully secure a mortgage and make an informed property purchase.

What Is a Non-Resident Mortgage?

A non-resident mortgage is a loan offered to individuals who do not reside in Canada full-time but wish to purchase property within the country. It’s important to note that a "non-resident" includes foreign nationals who are not citizens or permanent residents of Canada, as well as Canadian citizens living abroad for extended periods.

Although Canadian banks and financial institutions are open to offering mortgages to non-residents, the requirements are stricter than for residents. Here's why:

1. Higher Down Payments: Typically, non-residents are required to provide a down payment of 35% or more of the property’s purchase price. This is significantly higher than the standard down payment for Canadian residents, which can be as low as 5% in some cases.

2. Credit History and Income Verification: Lenders will generally ask for proof of income and credit history from your home country or the country where you currently reside. Additionally, they may require a detailed financial profile that includes your assets and liabilities.

3. Higher Interest Rates: Due to the increased risk lenders face when offering mortgages to non-residents, interest rates may be slightly higher compared to what a Canadian resident would pay. This difference, though usually not enormous, can still have an impact over the life of the mortgage.

4. Mortgage Terms and Conditions: Mortgage terms for non-residents can vary in length, usually between 1 to 10 years. However, it’s essential to understand that the rate and structure of the mortgage—fixed vs. variable rate—could be impacted by your non-resident status.

Who Can Apply for a Non-Resident Mortgage?

Several groups of people fall under the non-resident category, and they are all eligible to apply for a mortgage in Canada, provided they meet the financial institution’s requirements. These groups include:

• Foreign Nationals: These are individuals who do not hold Canadian citizenship or permanent residency but are interested in purchasing property in Canada, either as an investment or for personal use.

• Canadian Expats: Canadians who live and work abroad but want to own property in their home country can apply for non-resident mortgages.

• Temporary Workers or Students: Foreigners living in Canada under a temporary work or study permit may be considered non-residents by banks but can still be eligible for a mortgage.

Key Considerations Before Applying for a Non-Resident Mortgage

1. Canadian Real Estate Market Trends

Before diving into the property market, non-residents should take a closer look at local trends. Cities like Vancouver, Toronto, and Montreal have booming real estate markets, but they also come with sky-high prices. Understanding these dynamics will help potential buyers decide where to invest.

2. Foreign Buyer Taxes

In provinces such as British Columbia and Ontario, foreign buyers must pay an additional property transfer tax. For instance, in Vancouver, foreign buyers pay a 20% tax on top of the property’s purchase price. Other provinces may also have specific regulations aimed at limiting foreign ownership of real estate.

3. Currency Exchange Rates

Non-residents should be mindful of fluctuating currency exchange rates, as these can significantly impact the overall cost of the mortgage and monthly payments. Currency volatility could either increase or reduce the amount you’ll need to pay each month.

4. Legal Advice and Local Knowledge

It’s recommended to hire a real estate lawyer familiar with Canadian laws regarding foreign buyers. Legal representation can help ensure the mortgage process goes smoothly, and all legal requirements are met. They can also help explain any potential restrictions on property ownership for foreigners in Canada.

Steps to Secure a Mortgage as a Non-Resident in Canada

1. Find a Lender That Offers Non-Resident Mortgages

Not all Canadian banks and lenders offer mortgages to non-residents. The first step is to find a financial institution that has experience working with foreign buyers. Major Canadian banks such as RBC, TD, and Scotiabank are known to offer such mortgages.

2. Prepare Your Financial Documentation

Lenders require a detailed financial profile before granting a mortgage. This profile typically includes:

• Proof of income: Recent pay stubs, employment letters, or tax returns.
• Credit history: You may need to provide a credit report from your home country.
• Bank statements: These demonstrate your financial standing and liquidity.
• Down payment: You must show that you have sufficient funds to cover the large down payment (35% or more).

3. Understand the Mortgage Options

Canadian mortgages typically offer the following types of interest rates:

• Fixed Rate: A fixed rate mortgage offers the security of knowing exactly how much you’ll be paying over the course of the mortgage term. This is often a good option for non-residents who want stable payments without the risk of fluctuating interest rates.

• Variable Rate: Variable rate mortgages fluctuate based on the Canadian prime rate. While variable rates tend to start lower, they can increase if interest rates rise. Non-residents who plan on holding the property long-term should carefully consider whether they are comfortable with this risk.

4. Apply for Pre-Approval

Getting pre-approved for a mortgage can help smooth the buying process. A pre-approval will give you a clear idea of how much you can afford to spend on a property and show sellers that you are a serious buyer. It’s essential to complete this step before starting your property search.

5. Hire a Real Estate Agent

A real estate agent familiar with working with foreign buyers can be an invaluable resource. They will help navigate the complexities of the Canadian housing market, including assisting with negotiations, understanding local customs, and recommending the best areas for investment.

Case Study: Successful Non-Resident Mortgage Applicants

Take the example of David, a U.K. citizen who wanted to purchase a vacation home in Whistler, British Columbia. David contacted RBC and applied for a non-resident mortgage. By providing all necessary documentation, including proof of his U.K. income and assets, David was able to secure a mortgage at a competitive interest rate. He paid a 35% down payment and successfully acquired his dream property.

This case highlights the importance of preparation and choosing the right financial partner.

The Bottom Line: Can Non-Residents Get a Mortgage in Canada?

In conclusion, yes, non-residents can absolutely get mortgages in Canada, but they should be ready for a more rigorous process and higher financial commitments compared to Canadian residents. By understanding the requirements, costs, and potential obstacles, non-residents can better position themselves to secure a mortgage and invest wisely in Canadian real estate.

Non-resident buyers must also remain aware of additional taxes and legal obligations associated with foreign ownership, especially in high-demand urban markets.

If you’re considering purchasing a property in Canada as a non-resident, working with an experienced mortgage advisor and real estate agent is highly recommended to streamline the process and avoid costly mistakes.