Mortgage Requirements to Buy a Vancouver Property
Jun 18th, 2012
Canadian banks have grouped potential buyers of Vancouver property into different categories and the requirements are different for all of them: first-time home buyers, investors and non-residents of Canada.
Which Mortgage is Right for You?
The maximum amortization period for all categories is 30 years and the maximum term is 10 years. The minimum down payment is 5% for Canadians. Before you start shopping for a new home, check your credit score with Equifax
. The lower your score, the higher a risk you are to the banks and the higher the rate of interest you will pay. In some cases you won't qualify for a mortgage at all. You will also require written verification of employment. As well, your taxes must be up-to-date and you will need written confirmation of this from Revenue Canada
Banks offer open, closed and convertible mortgage, as well as variable and fixed rate. For buyers with a downpayment of less than 20% the mortgage will have to be insured against default and the amortization period will be of 25 years. Mortgage default insurance is a one-time premium paid when your purchase closes. You can pay the premium or add it to the principal amount of your mortgage. Once you have qualified for a pre-approved mortgage, the bank will hold the rate for 90-120 days, depending on market conditions. Discuss with your lender which mortgage option is best for you.
Under the Home Buyers' Plan (HBP), a first-time home buyer can withdraw up to $25,000 tax-free from their RRSP (Registered Retirement Savings Plan)
to buy or build a home. If you are purchasing the home with a spouse, you can each withdraw up to $25,000 from each of your RRSP accounts.
Investors will require at least 20% down payment. The higher the down payment the better the rate.Taking out a second mortgage on your property is a lot more difficult than it used to be.
Non-residents of Canada
(meaning you stay in Canada for less than six months each year) are deemed to be a greater risk to Canadian banks. You will require at least a 35% down payment and a banker's letter of reference provided by an applicant's previous bank or a credit report from the applicant’s country of origin. These documents may influence a lending institution in regards to both the approval of the mortgage application and the interest rate charged. You will need a personal net worth statement, copies of two pieces of ID, a real estate appraisal by the Canadian bank, a Canadian bank account
, and three months of bank statements which show where the 35% down payment is from.
For non-resident mortgage applications, the economic rent (as indicated in the appraisal which must be done as part of the financing requirements), must be sufficient to cover the monthly mortgage payments.
If you have questions about Canadian mortgage requirements
, speak to a mortgage broker for more information.
Written by Maggie Chandler, providing trustworthy real estate services for 30 years.