What Is a Newcomer Mortgage?

Most Canadians will need to get a mortgage loan in order to purchase a home. A newcomer mortgage is a special mortgage program offered by some banks in Canada for those new to Canada. They are designed to help newcomers get a mortgage even if they don’t meet the eligibility requirements for a regular mortgage.

The main reasons why it can be difficult for newcomers to get a regular mortgage include:

Banks like to see that you’ve been employed for at least the last two years in Canada. Having a work history shows that you have a stable level of income.

A bank will look at your credit report to see how you have been handling debt. This includes a history of payments, such as whether or not you have missed any payments or made late payments, along with your balances and credit limits. An established credit history shows that you have been consistently responsible with your finances. In some cases you may need to provide bank statements to determine credit worthiness or supply a foreign credit report.

For those new to Canada, you might not have a work history and credit history in Canada. With a newcomer mortgage program, banks are more lenient on their eligibility requirements. However, you will need to meet certain criteria in order to be considered a newcomer to Canada.

Mortgages for those new to Canada can be insured against mortgage default by the Canada Mortgage and Housing Corporation (CMHC), Sagen, or Canada Guaranty. These insurers all have basic borrower qualifications. In order to be eligible for a newcomers mortgage:

In order to be considered a newcomer, you must have immigrated to Canada within the last 5 years. If you’ve been in Canada for longer than 5 years, you are no longer considered to be a new immigrant.
You must be in Canada as a temporary or permanent resident. This means that you should be a permanent resident/landed immigrant, or be a non-permanent resident with a work permit.

While you might not need to have 2 years of employment history for a new immigrant mortgage, you will need to have at least some full-time employment history. You will need at least three months of full-time employment history in Canada unless you are being relocated to Canada by your current employer.

You will need to make a down payment of at least 5%. This minimum down payment requirement can be higher, such as if the home price is over $500,000. Your lender can require the minimum down payment to come from your own resources and savings, rather than being gifted or borrowed.

Your debt service ratio shows how much of your income goes to service your debt. The higher this ratio, the worse it is, since you’re spending more of your income to service debt. You will need to have a gross debt service ratio (GDS) of 39% or less, and a total debt service ratio (TDS) of 44% or less.

The mortgage stress test rate will be used to test your GDS and TDS ratios. Your foreign debt is included when calculating your GDS and TDS, but your foreign rental income is not included.

If you meet the criteria above now is the time to give us a call to determine your affordability and lock in a rate!