SaveSavedRemoved 0

(June 5, 2024)

Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!

If you’re new to Canada and aspire to own a home, qualifying for a mortgage just got a lot easier! One would assume that with the influx of over a million new Canadians over the past couple of years, policies would naturally adjust accordingly. And that is precisely what’s playing out at the moment in the mortgage landscape when it comes to qualification rules for new Canadians.

Mortgage qualification guidelines have, if anything, tightened over the last decade and a half, but this recent announcement from one of Canada’s leading lenders pretty much spotlights the significance of one of the leading mortgage qualification cohorts in Canada these days: new Canadians (more specifically, permanent residents and work permit holders, which are often referred to as temporary or non-permanent residents). With a stale (and in many regions, declining) birth rate and ongoing productivity issues, you can understand the importance of loosening the qualification standards for this particular group. Lately, and likely going forward, this group has become the main contributor to population growth in Canada. So, with many work permit holders transitioning to permanent residents on a massive scale, it was only a matter of time for Canadian mortgage qualification standards to adjust and accommodate.

Here’s a rundown of some recent adjustments to the Canadian mortgage qualification rules for both Permanent and Non-Permanent residents:

For Permanent Residents:

Lenders typically adhere strictly to the 3-month full-time employment requirement. However, some are now offering exceptions, provided there’s a solid rationale backing the request. For instance, if your new job is linked to your previous employer, chances are high for an exception. Various other scenarios may also warrant exceptions but on a case-by-case consideration.
Maximum allowable amortizations have been extended to 30 years. This is notable for two reasons: it addresses affordability concerns by reducing the overall mortgage payment, and conversely, it boosts the applicant’s purchasing power, which is particularly crucial in competitive markets. For instance, consider a $500,000 mortgage payment at today’s 5-year rate of 5.19% (as of May 27, 2024, subject to change). Amortized over 25 years, the payment would be $2,963/month, but stretched to 30 years, it drops to a more manageable $2,725/month. Moreover, from a qualification standpoint, a $100,000 annual income could increase purchasing power by up to 15% when qualifying with a 30-year amortization. Three cheers for 30 years!
The minimum required tenure for self-employed applicants in Canada is typically 2 years (requiring the most recent 2 years’ Notice of Assessments and T1 Generals). However, Permanent Residents with less than 2 years in self-employment can now qualify using only their most recent Notice of Assessment and T1 General. This is a notably generous guideline modification; seize the opportunity!
Qualification limits for Permanent Residents have expanded, allowing for larger qualification amounts, provided you can demonstrate 12 months’ worth of your qualified mortgage payment in savings. For instance, if you qualify for a $500,000 mortgage with a monthly payment of $2,800, showing at least $33,600 (12 * $2,800) in a separate bank or investment account, in addition to your down payment proceeds, you could potentially qualify for up to 80% to 100% more!

For Non-Permanent Residents (work permit holders)

Previously, Non-Permanent Residents were limited to purchasing properties no larger than 2 units (duplexes). Now, you can purchase a fourplex with as little as a 10% down payment. This is particularly noteworthy as you can also use the potential rental income from the 3 units where you do not reside as eligible qualifying income, significantly boosting your overall purchasing power. For instance, if you qualify for a $500,000 mortgage on your own merit (for a single-family dwelling), exploring further with an experienced and open-minded mortgage broker might reveal that you could actually qualify for a $750,000 fourplex purchase…think big!!
Minimum down payment thresholds have also decreased for non-permanent residents. You can now purchase a duplex with a 5% down payment and a fourplex with 10% (provided the purchase price is less than $1M).
Non-permanent residents are now eligible for the Purchase Plus Improvement mortgage, a slick mortgage product that advances additional funds to make immediate improvements to your newly acquired property, up to a limit of $40,000.

Lastly, it’s crucial to be aware of the Prohibition on the Purchase of Residential Property by Non-Canadians Act and whether it applies to you. Additionally, don’t forget to familiarize yourself with whether the Foreign Buyer Tax applies to your specific area, as it is not applicable in several provinces (e.g., Alberta excludes the Foreign Buyer Tax, while BC and Ontario enforce it).

Are you new to Canada and have questions about mortgage qualification? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

Download my amazing Mortgage App…it’s loaded with calculators and tonnes of useful information!

Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!