New immigrants to Canada may have second thoughts about investing in real estate, doubting that they can obtain financing for a property. This is untrue. Even as a new Canadian, you can still explore opportunities in real estate investment, but you will need a mortgage from Canada’s lenders if you don’t have enough savings to pay in cash.
There are many options to secure financing, but the mainstream providers are a bank, a financial institution, an insurance firm, or trust company. Major commercial lenders will provide you with a list of requirements you have to complete and submit to them. It can be a little challenging to get a lower interest rate as compared to what is given to native Canadians. However, understanding what the lenders are looking for will help you prepare and increase your chances of getting approved.
Provide proof of income
Lenders will require you to submit proof of income, which will help them assess your financial ability to pay the loan. For an employee who receives a regular paycheck, you can submit your certificate of employment and your latest payslip. For self-employed, you need to provide proof of steady income, such as your earnings from a business. Self-employed usually need to complete more requirements to prove their financial capability. The process can be time-consuming, so it is better to work on them as soon as possible.
Create a good credit history
As a new Canadian, you probably have little to no track record of borrowing and repayment in the country. So if you are planning to invest in real estate, it is best to start developing a good credit history as soon as you arrive. You must open a Canadian bank account and use it frequently. Pay your bills on time and obtain a credit card. Once you have a credit card, use it for transactions where you would normally pay cash, then pay your credit card bill in full each month. Remember that you want to build a good credit history and not a mountain of debt.
If you have a credit history record from your previous country, you can also submit a copy to the lender. This will help show your creditworthiness and your behaviour about money. In some cases, lenders will ask for a recommendation letter from your landlord to ensure that you have been a good payer over the last year.
Prepare your down payment
As a new Canadian resident, you will need to provide a downpayment for the property you want to acquire. If you can shell out 35 percent of the selling price, you have a higher chance of getting approved for financing.
If you already have resident status and you plan to live in the house you are buying, you must pay 5 percent of the purchase price. If you are still a non-resident, the down payment is 10 percent. If you plan to buy a rental property, you must pay at least 20 percent for the down payment.
To wrap it up
Don’t get discouraged when you are a new resident and you want to invest in real estate. Know what the requirements are that lenders usually look for, and prepare them as complete as possible. Some lenders may show flexibility, but it is always best to come prepared.
If you are looking to buy real estate in Ontario, Zumin Real Estate will be able to help you. Contact us now for a consultation!