Canada is known to be the friendliest and most beautiful country in the world. So people want to call Canada their permanent home. Canada’s vibrant real estate market attracts buyers from all over the world to get mortgages in Canada. 

The common question that arises in the mind of people is: “Can a Non-Resident Get a Mortgage in Canada?”. A potential buyer must be aware of the specific considerations and requirements to help themselves.

What is a Non-Resident?

A Non-Resident is a person who has been living outside of Canada for more than 180 days and doesn't have any significant residential ties in the country. Non-residents usually don’t have any citizenship certificate or Canadian permanent resident card.

Who is a Non-Permanent Resident?

A Non-Permanent Resident is a person who is living in Canada temporarily. They may have a work permit or a student visa but did not receive any permanent citizen identity. They often stay in Canada for a long time and can become permanent residents.

What is a Mortgage?

A mortgage is a type of loan specifically used to purchase real estates such as a house or any other property for yourself. The key aspects of a mortgage are: {Principle, Interest: (fixed rate mortgage, variable rate mortgage), Term, Amortization, Down Payment, Collateral, Monthly Payments: [(principal repayment, interest payment, property taxes, homeowner’s insurance, and Private mortgage insurance(PMI)], Closing Costs}

Amortization

It refers to the spreading out of loan payments over the term of the mortgage. A traditional mortgage amortization schedule includes the portion of payments going toward the principal and the portion going toward interest.

Types of Mortgages

Several types of mortgages are available to homebuyers each with its features, benefits, and drawbacks:

• Fixed Rate Mortgage(FRM):

• Description: Remains constant for the entire loan term.
• Term Lengths: Commonly between 15-30 years.
• Benefits: Predictable monthly payments and stability against currency exchange rates.
• Drawbacks: Typically higher interest rates compared to the other.

• Adjustable Rate Mortgage(ARM):

• Description: Interest rate changes based on an index.
• Term Lengths: Commonly between 5-10 years with a fixed rate 
• Benefits: Lower initial rates as compared to FRMs.
• Drawbacks: Uncertainty in monthly payments after the initial period. 

• Interest Only Loans:

• Description: For a given period, they only pay interest which results in lower initial payments.
• Term Lengths: Typically between 5-10 years.
• Benefits: Lower initial payments
• Drawbacks: No principal reduction during the interest-only period.

• Reverse Mortgages:

• Description: The homeowners convert part of the equity of their homes into cash.
• Term Lengths: For 62 years or more older people.
• Benefits: No monthly mortgage payments are required.
• Drawbacks: Reduces equity, high fees, and interest.

Challenges of Obtaining a Non-Resident Mortgage

Canada’s sturdy real estate market continues to attract international buyers drawn by its economic stability, high-quality life, and scenic landscapes. However, obtaining mortgages in Canada for non-residents comes with a lot of challenges.

There are some hurdles that one should know while facing challenges as a non-resident:

• Higher Down Payments Requirements

Non-residents in Canada typically face higher down payment requirements as compared to Canadian citizens. While the citizens can pay the down payments, on the other side the non-residents face problems in doing so.

• Stringent Income Verification

Canadian lenders require proper documentation for the verification of their income and employment status. Non-residents must often provide Full name, Birthdate, Proof of income (pay stubs or tax returns), Letter of reference from their financial institution, 

Proof of the 35% down payment, Net worth, Photo IDs, An active Canadian bank account, Report from a Canadian credit bureau, and Other documents, as requested. 

• Limited Credit History

Non-residents do not have any Canadian credit history which is essential to judge the risk of lending. Without the local credit score, providing creditworthiness becomes challenging.

• Higher Interest Rates

Due to the higher risk, the non-residents might be subject to higher interest rates than the residents. 

• Currency Exchange Rates

Shifts in currency exchange rates can impact the overall cost of purchasing properties and repaying a mortgage. Non-residents can face issues while buying property due to foreign currency exchange rate changes.

What Makes Non-Resident Mortgage Different?

One should know what is the difference between a non-resident mortgage and a resident mortgage. Both differ from one another as the term suggests that a non-resident mortgage is given to a person who has lived in Canada for a few years and the resident mortgage is given to the local of Canada. The non-residents do not have the right to own a property. These differences come in varying terms like interest rates, and taxes.

• Tax Differences

There are differences in the taxes for the residents and non-residents of a country. Tax rates paid by the residents are low as compared to the non-residents the tax they pay has a higher percentage.

• Bank Financing

Some of the banks require some sort of security and appliance checks to approve a non-resident mortgage. Non-residents need to show trust in front of the banker so that they can get the bank's approval for their mortgage.

Understanding the Differences Between Non-Resident and Non-Permanent Resident Mortgages in Canada

In Canada, mortgage options are available to both non-residents and non-permanent residents. It differs due to their eligibility criteria and downpayment criteria as well.

NON-RESIDENT MORTGAGE

• Definition: People who do not live in Canada and do not have permanent resident status.
• Down Payment: 35% of the property value.
• Income Verification: Detailed verification is needed, and includes international income sources.
• Credit History: International credit reports.
• Interest Rates: Higher due to higher risk.

NON-PERMANENT RESIDENT MORTGAGE

• Definition: People who live in Canada temporarily.
• Down Payment: At least 10% of the property value.
• Income Verification: Only proof from Canadian sources is needed.
• Credit History: Canadian credit history
• Interest Rates: Comparable to those of permanent residents.

CONCLUSION

In conclusion, non-residents can get a mortgage in Canada, but specific requirements and conditions are to be met. These requirements are eligibility, down payments, income verification, credit history, interest rates, and many more. Once these conditions are met non-residents can get mortgages in Canada.