The information here is for general information only and you should speak with a bank advisor or mortgage broker for information relevant to your case.
When you plan to buy a property in Canada, you can pay part of the cost in cash and borrow the rest of the cost.
A loan that helps you pay the rest of the costs of buying a property is called a mortgage in Canada. This loan is a contract between you and the lender, and the guarantor is the property you buy with the loan money. If you do not adhere to the terms and conditions of taking a mortgage in Canada and its regulations, the lender has the legal right to confiscate and take possession of your property.
Benefits of getting a mortgage in Canada
- You don’t have to pay all the money for the property at once.
- Usually, but not always, you can borrow the remaining amount by prepaying about 5 to 20% of the property price.
- You can pay the loan over a period of 5 to 30 years.
- You can usually choose the type of bank interest for your loan depending on your job and income
General conditions for obtaining a mortgage in Canada
- The property must be habitable year-round and located on Canadian soil
- Between 5 and 35% of the house price must be paid in advance. This percentage depends on the condition of the property and the ability of the loan applicant
- Prepayment can be obtained from savings, property sales or non-refundable financial gifts from relatives or acquaintances.
- The borrower’s debt ceiling should not be more than 39-44% of his monthly income, this percentage depends on the credit history of the mortgage applicant and the lender’s financial institution.
- If the advance payment is less than 20% of the property value, the loan must be insured
Required documents to apply for mortgage:
- Your current employment information, including a T4 form, pay slip, or letter from employer
- Other sources of income such as investments or income from your business
- Statement of your investments and savings in the last 90 days
- Proof of withdrawal from the retirement savings plan, if you are using the home purchase plan
- If a family member or friend helps you with an amount as a gift, you need a letter stating that this amount is not a loan.
- A voide check
Institutions for apply for mortgage:
Financial institutions in Canada can be divided into three main categories,
- Traditional lenders, also referred to as Group A Lenders:
The term A lender refers to banks and credit institutions that only lend to Group A customers who have good income and credit scores.
For example, we can mention banks such as BMO, CIBS, National Bank of Canada, Scotiabank, RBC and TD.
These financial institutions are subject to federal government regulations.
２. Alternative or shadow lenders, also called group B or B Lender:
Apart from the 6 main Canadian banks, banks such as Equitable and Home Capital provide services to Group B customers.
These financial institutions lend more easily, but they compensate for this with higher interest rates! In other words, these institutions give loans to people who have not obtained sufficient conditions to receive loans and credit cards from 6 main banks.
- Private lenders:
Private lenders are very diverse, private lenders may be your parents or institutions that specialize in mortgages.
