How do you apply for a mortgage when moving to Canada from the USA?
This nuances for what applies is a very complex topic!
- If you’re a Canadian in the US, what do you need when moving back to Canada?
- Does it matter if your income is going to be in the US or in Canada?
- What about your credit score in both countries?
- What if you are a US citizen moving to Canada?
- What about the non-resident speculative tax?
- What other programs are available?
- How are properties owned outside of Canada valued?
- What about other lenders, such as B-lenders or C-lenders? What exceptions are there if there is a Canadian spouse involved?
- What if you are retired and returning to Canada?
- What are the two options available? What if you are an international resident returning to Canada?
Hi Chris, How are you doing? Lawrence Very well. Thank you. Thanks for having me. Excellent. Today we wanted to go through the topic of Canadian citizens are moving back from the US and want to buy property.
That’s roughly the topic, and I’m sure there are many different pitfalls and information that we need about. So can you talk about that? Let’s take the scenario, for instance, of somebody who is a Canadian citizen, and they live in the States for the last few years, they’ve worked there. Now they want to move back because of COVID or whatever other situation.
Probably maybe regarding the US election, but what else? What type of information do they need, and the different qualifications different from the business? Right. So, if you’re a Canadian citizen returning to Canada, we have to be very specific about defining circumstances. So the scenario is you’re Canadian, You are returning to Canada. The most important question from a mortgage point of view to qualify for your mortgage is where your income is been earned. It stands to reason that to apply for a mortgage; you have to have income. So if you are, and especially with the pandemic, we’re finding many Canadian citizens can still maintain their work in the US but work remotely.
So if you are earning your income outside of Canada, you’re due to be a non-resident. And, if you’re coming from the US, you must have at least a 20% down payment if you are a non, deemed to be non-resident. And again, the definition of a non-resident is not that you’re Canadian and living in Canada from a mortgage point of view; it is where your income is being earned clear as much, right.
So far, so good. Okay. Now, if you’re a Canadian returning to Canada and you have a job lined up in Canada, then it’s very much business as usual. So if you’re purchasing a home under $1 million, you can qualify for a high ratio, mortgage insurance, okay with it: you, the minimum down payment by 5 to 10%. And in many ways, you’re treated like anybody who has been in Canada for an extended period.
One thing that will be important to the mortgage lender, in either case, is your credit history. So it’s a good idea. If you are living in the States to establish Canadian credit, that’s important. If you don’t have a Canadian credit Bureau, And it’s only a US credit Bureau. The lender can look at that on exception, but ideally, you have established credit in Canada.
Even though I was still using TransUnion or Equifax, they’re considered a separate system, even though it was like the same company that that’s correct. That’s correct. Yeah. And, so those are the two essential considerations.
Where is your income being earned? And what type of credit history is available in both countries?
But in both cases, it certainly can be done. And, I think, to add some further context to this, it might be interesting to talk about what if you’re a US citizen wanting to move to Canada?
Right. And so the first consideration is, having status here in Canada, because if you are deemed to be not Canadian, so not a permanent resident moving and not married to a Canadian, then you’re going to be a non-resident and specifically Lawrence, maybe you can add some color to this. We have a non-resident speculative buyer tax.
Yeah. So, unfortunately, you’ll have an additional 15% if you are not a resident of Canada, of, here, and also if you’re buying property and like the golden horseshoe. So that just that’s roughly what it is, but there are some details involved with that. Right. And so there are areas outside of the golden horseshoe where you could buy without the speculative tax.
Correct. And I think it’s also worth mentioning that if you pay the tax and subsequently become a permanent resident, you can request a full refund of the tax you’ve paid. I think you’re given a 12 or 24 month period to do that. And, and so that’s, that’s available to you. So yes. So if you go coming back to the scenario of a US citizen, if you hold US citizenship, And you want to purchase real estate in Canada. Again, it’s, we have to define the two scenarios, which is where is your income being earned? If you are earning your payment in the US and would like to buy in Canada, you’re deemed to be non-resident, and as such, you will have to purchase with at least a 20% down payment. Okay. But if you’re a US citizen who moves to Canada, has employment in Canada, and pays income tax in Canada, then you can qualify under a mortgage program called New to Canada.
And so, as long as you landed, you don’t have to have—citizenship status necessarily. You can be here on a work permit, but your employment is here. You can qualify for high ratio mortgage insurance under these unique New to Canada programs. So the difference between all these different scenarios that we’ve discussed can be very subtle, the nuance of it.
And it really what defines it is not if you’re Canadian or American. If you’re living in the US or living in Canada, what matters most is where you’re earning your income from the perspective of a mortgage application.
Yeah. Sounds good. Let’s go back to the information that when you’re moving to Canada, What about if you have a property in the US like, how does that work in terms of other calculation or what the banks would consider?
Yes. Good question. The debt would be added to your current liabilities. You would have to demonstrate the ability to qualify for whatever liabilities you have in the US and whatever liabilities you have in Canada. It would be treated no differently than having a second property here in Ontario, for example.
Okay. So whether I, if I owned a property in New York or owned property here, it just has to do with the level of debt service that I would have for my mortgage amount. That’s correct? Yes. And, again, when we do the credit searches, your credit reports, the mortgages will report on the credit report. So it will be straightforward for a lender to determine that you have debt in the US okay.
That sounds good. And this is, this is more related to, I guess, what we’ll call lenders, which are just the banks, but I think if you get more towards the private lenders or VRC lenders, I think I’ve got here would be different.
Yeah, they’re going to assess it a little bit more pragmatically, but certainly, if you are earning your income in the US and require financing here in Canada, they’re going to do still the debt servicing ratios. They’ll probably relax the proportions a little bit, and there’ll be a little bit more flexibility, but they’ll still treat it very much like any application for an applicant here in Canada, locally. Great. And you also mentioned again, if this is a little bit of a nuance, if the spouse is here, let’s say, for example, the spouse is a Canadian citizen, but the main principle would be in the States. How would that work, or is that just detailed best for somebody to contact you, to ask you? Because actually, there’s a lot of nuances, right?
So you have US citizens married to Canadian citizens. The good news there is that because of that marriage. There is no non-resident buyer’s tax. So you would not have to pay that tax if you have a Canadian spouse. So that’s good news. And then the question will be, where is the income is being earned or in the US or Canada?
But it certainly can be done, and the lender or are pretty accommodating to the different scenarios. Great. And then there’s also the situation when I’m retired, people are moving back, so maybe they may not have the income, but they’re retired. And then when, you know, dissolve their assets in the States and come back to Canada, and in their particular case, what could you do in terms of financing or what is the best way for that to move forward?
Yeah, so there are two ways that retirees can. Finance the property, the first way and, probably the better way, because it has a lower interest rate associated with it is to participate in a net worth program. Some of the banks have specific net worth programs where you can demonstrate a certain level of assets to cover the mortgage.
The lender will use that instead of traditional debt servicing. So they’re not going to look at your cash flow. They’re going to look at the level of assets you have; worth noting that the assets have to be in a Canadian institution, so if you have stocks, bonds in the US, or cash savings in the US. In a US institution, it can be in US dollars, but not in a US institution. Then they won’t count that. So they want it here in Canada, in a Canadian institution. So that would be the first way.
The second way is via a reverse mortgage. And reverse mortgages are probably something we can reserve for another video, but the deal with the reverse mortgage is that if you’re over the age of 65 and have equity built up in your home, you can get up to about 50% of the value of your home, and this is done without showing any net worth without showing any income. So it’s a unique product and, we see a lot of utility for reverse mortgages.
And I think we’ll save that for another year. Right. We’ll save that for another video next time. Lastly, you mentioned that if you’re moving from the US and come back to Canada, what about internationally?
Is it slightly different if you’re coming back from, say, you know, the UK or something like that? Yeah. So if you’re, if you’re non-resident, moving from anywhere outside of, the, North America or really just the US I should say, cause Mexico would be the same. So if you’re returning to Canada and you’re a non-resident meaning that you’re earning income outside of Canada, Then you must purchase with 35% down.
Not, yeah. So the required down payment increases, to that to 35%. Okay. And again, this is just anywhere outside of the US so again, if you’re just coming from like France or Italy or somewhere like that, it’s still 35%. It’s not about the financial systems. That’s correct right? Yeah. And you know, I’ve had clients who work for international schools. They’re, ex-pats working in the Middle East or Hong Kong, or China, and they have real estate here. They want to purchase an additional investment property. And again, it’s not defined by, are you a Canadian citizen defined by where your income is being earned? Is there a downside to Canada? You’re non-resident, and you must have 35% down.
Wow. So it sounds like a lot of details. I highly recommend that if anyone has a particularly unique situation to talk to with Chris so that we can figure out that the little of where you live or where your residency is, whatever property owned, where you earned your money, where your spouse lives and that kind of stuff.
So it sounds like there’s a lot of different options that really should talk to a professional actress to do to figure it out. Thank you. Lawrence. Yes, it is open to anybody.
Have a good day. Thanks, Lawrence. All right, bye-bye.
If you have any questions about Toronto real estate, please call or text Lawrence at (416) 276-4895.
For mortgage questions, call Chris Molder at 416-732-8020.
Lawrence Mak, Real Estate Broker, EXP Realty
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