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By Simon Conn | Mortgage Advisor

Updated: 20th November 2020*

With national wildlife parks, an abundance of lakes, and some of the best ski resorts in the world, Canada has plenty to offer for people eyeing an overseas property.

Whether you’re looking to move, want a holiday house, or just want to invest in some of your money in Canadian property, with the right advice, getting a mortgage in Canada could be easier than you think.

In this article we provide answers to the most commonly asked questions about buying property in Canada including:

If you’d like to save some time and hassle, call 0808 189 2301 or make an enquiry. We’ll connect you with one of the expert mortgage brokers we work with for a free, no obligation chat.

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Can I get a mortgage in Canada?

The answer is yes! You can get a mortgage for a Canadian property, even as a non-resident. Although the law for getting a mortgage can vary between provinces, buying a property in Canada is relatively safe.

However, any mortgage would have to be raised by a Canadian mortgage broker or bank as the Canadian mortgage system doesn’t allow foreign banks to register mortgages in Canada. The specialist brokers we work with have on-the-ground knowledge to help you with finding the right Canadian provider for your mortgage.

There could still be options available for a mortgage with bad credit.

Use a trusted Canadian mortgage broker

Look for a broker with experience in negotiating mortgages in the region of Canada you’d like to get your property: whether Toronto, Vancouver, Montreal or Calgary, a specialist mortgage broker will have a sound understanding of property values in the region of Canada and what mortgage terms you can expect.

When choosing your broker, it’s important to check their experience as many brokers claim to be whole of market without having the necessary knowledge to handle such a niche mortgage. This can lead to misinformation and errors on your mortgage application which cause delays.

That’s why we only work with qualified advisors who have proven track record of managing mortgages similar to yours.

Contact us if you’d like to get in touch with a mortgage broker experienced in helping people secure a Canada mortgage.

Do I need to apply for Canadian citizenship to buy a property?

Although qualifying as an immigrant can be a simple process with most expats gaining residency through applying as a Federal Skilled Worker, you do not need to gain citizenship to buy a property in Canada.

Canada has an open-door policy for foreign property ownership and non-residents have the same rights of ownership as residents and citizens of Canada.

Can I afford a mortgage in Canada?

To establish whether you meet the requirements of a Canadian mortgage, lenders may look at your:

  • Employment type
  • Age
  • Income
  • Property type you want to buy
  • Credit history

Before applying to any lender, always calculate your affordability for a mortgage.

Applying to a lender without knowing whether you can afford their interest rate or terms, could result in your mortgage application being declined, which in turn leaves a bad mark on your credit report.

Should I use a Canadian mortgage calculator?

It’s best to speak to someone directly who can look at all of the factors that will be considered when a lender assesses your affordability.

Online mortgage calculators provide inaccurate quotes because they don’t include important factors such as home insurance costs or utility bills which of course, can affect your ability to repay your Canadian mortgage.

This can leave many potential homeowners feeling unsure about whether they’ll be approved for a Canadian mortgage.

Therefore, accuracy is key.

Can I get a mortgage with bad credit in Canada?

Credit issues can make some lenders wary of borrowers as they want to be confident that their loan will be repaid and credit issues can suggest a history of mismanagement of money.

However, there may be lenders who are more likely to accept you for a Canadian mortgage with bad credit, although their rates can be a lot higher.

Many people believe that because they have had severe forms of bad credit such as bankruptcy, that they will be rejected but this is not always the case.

Sub-Prime lenders in Canada are there to help those with bad credit. However, they will not do loans for non-residents. That said, there are private lenders that will do interest rate only loans with a minimum down payment of 35% depending on the area the property is located.

Talk to a bad credit mortgage specialist to find out more or see our bad credit mortgage information section for more details on how bad credit could affect your mortgage application.

How much could I get on a Canadian mortgage?

While Canadian lenders do finance the home purchases of non-residents, the average (LTV) tends to be around 65% of the property’s value.

This would mean that for a property worth $200,000, you could require a 35% deposit of $70,000.

This Loan to Valuation Ratio (LTV) will vary heavily depending on many factors including you choice of lender, credit history and the type of mortgage you are applying for.

Are there any taxes on Canadian mortgages for non-residents?

Yes, any non-Canadian citizen is liable to pay a Non-Resident Speculation Tax of 15-20% (depending on the province) of the purchase price of their property.

The amount of property tax you will be charged can vary between states. For example, when buying a property in Toronto, non-residents pay the same land transfer taxes as Canadian residents.

For the moment, Quebec does not have a one-time non-resident speculation tax so now would be the right time to invest in Quebec. There will however be an annual property tax to be paid like all other citizen homeowners.

What are the types of mortgages in Canada?

Similarly to the UK, banks and lenders in Canada offer a range of mortgage products. With a variety of mortgages to choose from, it can be difficult to understand the best route for you.

Repayment mortgage

This is the most common form of financing for foreign buyers who buy property in Canada.

A repayment mortgage requires the borrower to repay the capital and interest of their loan together in fixed instalments over an agreed term, although this is usually over 25 years. Each mortgage is linked to a term that ranges from 1 year to 10 years. That is renewable in blocks over an amortization period of 25 or 30 years.

Interest-only mortgage

Although it may be possible for a Canadian bank or lender to loan a mortgage on an interest-only payment basis, these can be harder to obtain.

This is because the risk of the mortgage not being repaid in full is greater to the lender as only the interest of the loan is usually paid on a monthly basis.

This leaves the full balance of the loan to be paid back at the end of the mortgage term, which can be a substantial amount of money.

That being said, there are situations where getting an interest-only mortgage in Canada may be beneficial.

Self-employed borrowers could benefit from the flexibility that an interest-only mortgage can offer as in periods of low income they can pay their interest and in periods of high income, they can pay off some of their mortgage.

This is usually when a private lender would be required.

Fixed and variable rate mortgages

A Canadian mortgage with a fixed interest rate is a loan with an interest rate that will remain fixed and unchanged for the duration of the mortgage.

This provides some stability as your mortgage payments will be the same over the entire term.

A variable rate on a Canadian mortgage can offer some benefits though. This is because the interest you pay will vary based on the government of Canada’s Prime Rate, less any discounts awarded by the lender.

Those discounts remain the same for the length of your term, however your payments may fluctuate based on the Prime.

For example, if the Prime rate was 3.00% and the bank gave you a discount to prime of 0.5%, then you would be making a payment calculating an interest rate of 2.50%. That payment will remain until there is a change in the prime.

If the prime rate climbs to 3.50%, your contract will always have a 0.5% below prime payment, however your new payment will be 3.00%. The opposite also holds true if the Prime rate falls to 2.50%.

With your 0.5% discount, your new payment will drop to 2.00%. A variable mortgage can cause you to have a fluctuating payment over your term,

This can mean paying more interest at times, you could also end up paying less.

Remortgaging in Canada

Depending on your financial circumstances this may be possible as there are Canadian lenders who offer remortgaging products.

You will need to prove you can afford your mortgage through payslips, bank statements or an employment contract and any interest payments which can be higher than the actual rate in your mortgage agreement.

Some Canadian lenders offer remortgaging loans up to 80% of the property’s value, although the amount you can borrow against your home will depend on how much equity you own.

This however does not apply to non-residents. The maximum loan will be 65%.

Second home mortgage in Canada

Getting a second mortgage in Canada isn’t uncommon, especially with those looking to finance a holiday home or an investment property.

Your ability to get a second mortgage for a Canadian property is largely based on whether the lender deems you as eligible and in a financial position to afford two mortgages.

Many lenders in Canada require a 20% deposit for a second mortgage and you may also find that the amount you can borrow is limited.

Buy-to-let mortgage

Buy-to-let mortgages are available to foreign buyers in Canada but financing an investment property is a little more complex.

For example, the amount that you can borrow and the terms of your agreement can be affected by whether or not you’ll be occupying the property.

If you are considering buying a number of properties in one building, be aware that there may be a limitation of up to 4 units.

This is because, in Canada, a building with more than 5 units is classed as a commercial building.

Therefore, you would need to apply for a commercial mortgage.

Commercial mortgages

The qualification criteria for a commercial mortgage in Canada is a lot stricter than a residential buy-to-let mortgage. The interest rates can also be a lot higher.

Are there any Canadian mortgage rules I should be aware of?

Yes, since November 2018, banks in Canada must ‘stress test’ ALL homebuyers irrespective of the down payment amount.

The test has been introduced to establish whether buyers can afford their mortgage and interest payments. It uses either the Bank of Canada’s current 5-year posted rate or the customer’s mortgage interest rate plus an additional 2%, whichever is higher.

The purpose of this stress test to make sure that borrowers will be able to continue to make their payments should interest rates go up and to curb consumer debt.

How can I get the best mortgage rate in Canada?

Finding mortgage lenders offering the best rates can take time, especially if you’re unfamiliar with the Canadian property market.

Talking to one of the expert mortgage brokers we work with can help you filter out the lenders that are less suitable and focus on the lenders with more attractive rates.

A good Canadian mortgage broker will have access to hundreds of lenders and can compare mortgage interest rates across Canada, covering:

  • Montreal
  • Vancouver
  • Calgary
  • Edmonton
  • Ottawa

How can a mortgage broker help with your Canadian mortgage?

There are many reasons why having a mortgage broker can help you through the process of getting a mortgage for a Canadian property but here are some key areas they can assist you in:

  • Negotiating your mortgage terms and conditions
  • Explaining your mortgage agreement and ensure you understand the terms clearly before you sign anything
  • Making you aware of any additional fees or costs that you may need to pay
  • Managing any paperwork and send it to the correct authorities on time

Where can I go for Canadian mortgage advice?

If you have questions about getting a mortgage in Canada and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry.

We’ll connect you to one of the expert mortgage brokers we work with, ensuring that they have wide experience of helping customers arrange mortgages for property overseas. Chat to us for free, with no obligation or marks on your credit rating.

Updated: 20th November 2020
OnlineMortgageAdvisor 2020 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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