Understanding Mortgage Options for Newcomers

Moving to Edmonton, Canada, as a newcomer is undoubtedly fascinating.  However, obtaining a mortgage can be overwhelming for a newcomer seeking a home.  Finding the correct mortgage option is essential to homeownership in this beautiful city. So, if you are a Newcomer in Edmonton, this article will explore everything you need to know as a newcomer and help you find the right mortgage products for your needs.  

Understanding Mortgage Eligibility & Requirements for Newcomers

• A Newcomer is an individual who –
  • is already a Permanent Resident,
  • has immigrated to Canada within the last five years, or
  • has received confirmation of Permanent Residence from Immigration, Refugees and Citizenship Canada (IRCC).

• As a Newcomer in Canada, you can avail of a mortgage for a primary residence if you:
  • have Permanent Resident (PR) status, 
  • have a SIN number that does not start with 9,
  • have a full-time employment history in Canada,
  • have immigrated to Canada within the last five (5) years
  • have an international credit report. 

• Newcomers sometimes find it challenging to get a regular mortgage for two reasons:

• Insufficient employment history in Canada
• Lack of established Canadian Credit card history.

• Mortgage options are available to non-residents but may have more stringent requirements.

• A mortgage loan is the money taken from a lender, e.g., a bank, to cover the cost of the home you are buying.  The borrower must make regular mortgage payments to the lender over a while. The mortgage payment is made up of the principal and interest component.  The principal is the difference between the home’s purchase price and your down payment, and the interest is the lender’s charge for you to borrow the money from them.

• A down payment is a primary portion of the home’s purchase price that must be paid upfront when purchasing a home.   The more money you put down, the less you need to borrow, and the lower your overall interest costs will be.  Your employment history and immigration status could determine how much down payment you will need to buy your first home in Canada.

• Mortgages come with Fixed or Variable Interest Rates.  In a fixed-rate mortgage, the interest paid is set for the lifetime of the loan; as a result, the homeowner pays the same amount each month. This makes it much easier to plan for the budget.  A variable-rate mortgage, on the other hand, will vary according to market trends. 

Mortgage Options Open for Newcomers in Canada:

A wide range of mortgage options and savings tools can help you buy your first home in Canada sooner.

1. Government Programs and Assistance

Newcomers in Edmonton can use various government programs and assistance to make homeownership possible. The New to Canada Mortgage Program is offered by the three mortgage default insurance providers – Canada Mortgage and Housing Corporation (CMHC), Genworth Financial and Canada Guaranty.  This program helps persons with limited credit history or restricted residency status qualify for a mortgage. This initiative comes with easy documentation requirements, flexible down payment requirements and reduced insurance premiums. This program caters to permanent, temporary, and non-permanent residents working in Canada with valid work permits.

In addition, Edmonton has many government programs floated to facilitate homeownership for newcomers in the city.  The Home Buyers’ Plan (HBP) allows newcomers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to purchase a home without penalties.  In addition, several provincial programs offer down payment assistance or tax incentives to eligible first-time homebuyers. Newcomers in Canada can approach housing agencies or professionals for insights into such programs.  These professionals can help these newcomers avail of these resources to ease the financial burden of purchasing a home.

2. Alternative Lending and Mortgage Brokers 

Due to factors like lack of credit history or employment duration, some newcomers may not meet traditional bank lending criteria.  In such cases, they can approach alternative lending options or mortgage brokers.   

• Alternative lenders – such lenders include banks and credit unions.  These lenders look at factors beyond normal credit history.  They consider other factors like rental payment history, employment stability or foreign credit reports. 
• Mortgage brokers – have an extensive network and connect individuals with these lenders.  They can simplify the process and help newcomers find lenders who understand their unique situations.  They shop around for the best mortgage rates and products available. They negotiate on behalf of the homebuyer for better rates and products lenders offer. 

3. Building Credit and Financial Preparedness 

A vital step that needs to be taken by newcomers trying to get a mortgage is establishing credit and financial stability.  Some measures that can aid in building up a credit history in Canada are applying for a secured credit card, making timely payments and responsible management of finances. Conscious efforts must be made to build up a good credit score by having a good credit mix and reducing the number of new inquiries. Moreover, saving for a substantial down payment indicates financial readiness and can result in lower interest rates and mortgage insurance costs. Consultations with financial advisors and attending financial literacy programs can empower newcomers to make informed decisions and improve their financial standing, increasing their chances of securing favourable mortgage terms.

Conclusion

A newcomer in Edmonton requires careful consideration and exploration of various options while traversing the mortgage landscape.   Some vital avenues that can be explored by newcomers seeking home finance are Government programs, alternative lending, and responsible financial planning. By understanding these options and taking proactive steps to build credit and financial stability, newcomers can improve their chances of qualifying for a mortgage that aligns with their needs and goals. Edmonton welcomes newcomers with diverse mortgage options, making homeownership a tangible possibility for those starting their journey in this vibrant city.

Posted by MortgageApplyOnline On December 22nd, 2023