How Do I Apply for a Mortgage when Moving to Canada from the Us?

October 7, 2020

Talking more about your mortgage questions!

This week I talk about how to apply for a mortgage when moving from the US to Canada!

I am joined by Lawrence Mak, of Remax Realtron Realty, to discuss what you need to know about getting a mortgage when moving to Canada from the US and other countries. You won’t want to miss this one!

Below, we talk a bit more about your weekly mortgage questions!


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Don’t feel like watching? Find the full transcript below!

How do I apply for a mortgage when moving to Canada from the US?

Lawrence: [00:00:00] Hey everyone It’s Lawrence Mak here from Remax Realtron, I’m here joined again with Chris Molder from Tridac Mortgages. Hi, Chris how are you doing?

Chris: [00:00:09] Lawrence. Very well, thank you. Thanks for having me.

Lawrence: [00:00:11] Excellent. Well, today we wanted to go through the topic of Canadian citizens that are moving back from the US and they want to buy a property. That’s roughly the topic. And I’m sure there’s a lot of different pitfalls and information that we need about that. So, Chris, can you talk about that. Let’s just take the scenario, for instance, of somebody who is a Canadian citizen and they lived in the States for the last few years. They worked there and now they want to move back because of COVID or whatever other situation.

Chris: [00:00:36] Because of the impending US election?

Lawrence: [00:00:39] Maybe regarding the US election. But what else what information do they need and what are the different qualifications that are different?

Where do I start?

Chris: [00:00:49] Right. So if you’re a Canadian citizen returning to Canada. We have to be very, 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 being earned. It stands to reason that in order to apply for a mortgage, you have to have income.

So, if you are, and especially with the pandemic, we’re finding a lot of Canadian citizens are able to still maintain their work in the US but work remotely. So if you are earning your income outside of Canada, you’re deemed to be a non-resident. And if you’re coming from the US, you must have at least a 20-percent down payment if you are 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 is your income being earned? Clear as mud?

Lawrence: [00:01:57] Yes, so far, so good.

Chris: [00:01:58] OK, now if you’re 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 one million dollars, you can qualify for high ratio mortgage insurance. Combined with your minimum downpayment of five to 10 percent. And in many ways, you’re treated like anybody who has been in Canada for an extended period of time.

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 actually establish Canadian credit. That’s really 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.

Your credit history matters

Lawrence: [00:02:55] So even though still using TransUnion or Equifax, they’re considered separate systems, even though it’s like the same company?

Chris: [00:03:02] That’s correct. That’s correct. Yeah. And so those are the two important 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?

Lawrence: [00:03:28] Yes

Chris: [00:03:28] 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 to and not married to a Canadian, then you’re going to be a non-resident. And specifically, Lawrence, maybe you can add some colour to this. We have a non-resident speculative buyers tax.

Residency matters too

Lawrence: [00:04:00] Yeah. So, unfortunately, you’ll have an additional 15-percent if you’re not a resident of Canada. Also if you’re buying a property in like the golden horseshoe. So that just that’s roughly what it is. But there are some details involved with that.

Chris: [00:04:15] Right. And so there are areas outside of the golden horseshoe where you could buy without the speculative tax. Correct.

Lawrence: [00:04:21] Correct.

Chris: [00:04:22] And I think it’s also worth mentioning that if you pay the tax and subsequently become a permanent resident, then you can request a full refund of the tax that you’ve paid and you’re given a twelve or 24-month period to do that. And so that’s available to you.

Lawrence: [00:04:41] Yes.

Chris: [00:04:41] So, yes. So if you are 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 income 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 20 percent down payment.

Lawrence: [00:05:15] Right.

Your income is important

Chris: [00:05:15] 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 necessarily have citizenship status. You can be here on a work permit, but your employment is here. You can qualify for high ratio mortgage insurance under these special new to Canada programs.

Lawrence: [00:05:48] Right.

Chris: [00:05:48] 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 the mortgage application.

Lawrence: [00:06:14] Yeah, sounds good. So going back to the information that when you’re moving to Canada, what about if you have a property in the US? How does that work in terms of other calculations or what the banks would consider?

Chris: [00:06:26] Yes, good question. That debt would be added to your current liabilities and 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.

Everyone’s situation is unique

Lawrence: [00:06:47] Ok, so whether if I owned a property in New York or own the property here, it just has to do with the level of debt service that I would have for my mortgage amount.

Chris: [00:06:55] That’s correct, yes. And again, when we do the credit searches, credit reports, the mortgages will report on the credit report. So it’ll be very easy for a lender to determine that you have debt in the US.

Lawrence: [00:07:09] Ok, that sounds good. And this is more related to, I guess, what we’ll call “A” lenders, which are just the banks. But I guess if you get more towards the private lenders or B or C lenders, I guess a category would be different.

Chris: [00:07:22] 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 still do the debt servicing ratios. They’ll probably relax the ratios a little bit and they’ll be a little bit more flexible, but they’ll still treat it very much like any application for an applicant here in Canada locally.

Lawrence: [00:07:50] Right. And you also mentioned, again, if this is a little bit of nuance if the spouse is here let’s just say, for example, the spouse is a Canadian citizen.

It’s important to speak to a mortgage professional

Chris: [00:07:59] Yes.

Lawrence: [00:07:59] But the main principle would be in the states. How would that work or is that just really detailed and best for somebody just to contact you to ask you? Because I’m sure there’s a lot of nuances.

Chris: [00:08:09] Right. So you have a US citizen married to a Canadian citizen. The good news there is that because of that marriage, there is no non-resident speculative buyers tax.

Lawrence: [00:08:24] Yes.

Chris: [00:08:24] 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 being earned? In the US or in Canada? But it certainly can be done and the lenders are quite accommodating to the different scenarios.

Lawrence: [00:08:44] Right, and then there’s also the situation when retired people are moving back. So maybe I’m going to have the income, but they’ve retired and they want to dissolve their assets in the states and come back to Canada. And in that particular case, what could you do in terms of financing or what is the best way for that to move forward?

For retirees planning on heading home

Chris: [00:09:02] 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. So some of the banks have specific net worth programs where if 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 that you have. Worth noting that the assets have to be in a Canadian institution.

Lawrence: [00:09:44] Yes.

Chris: [00:09:44] So if you have stocks, bonds that are in the US or cash savings in the US, in a US institution, it can be in US dollars, but not in the 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.

Lawrence: [00:10:15] For sure.

Reverse mortgages might be an option

Chris: [00:10:16] 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-percent of the value of your home. And this is done without showing any net worth, without showing any income. So it’s a really unique product. And we’re actually seeing a lot of utility for reverse mortgages. And I think we’ll save that for another day.

Lawrence: [00:10:44] Great, another video next time. And lastly, you mentioned that these are if you’re moving from the US and come back to Canada, what about internationally, though? Is it slightly different if you’re coming back from the UK or something like that?

Chris: [00:10:57] Yeah. So if you’re non-resident, moving from anywhere outside of North America, really just the US, I should say, because Mexico would be the same. 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-percent down, not 30. So the required downpayment increases to that to 35-percent.

What about areas outside of the US?

Lawrence: [00:11:28] Ok, and again, this is just anywhere outside the U.S. So again, just coming from like France or Italy or somewhere like that, it’s still 35-percent. It’s not about the financial systems.

Chris: [00:11:38] That’s correct.

Lawrence: [00:11:41] Or English speaking.

Chris: [00:11:41] Yes, that’s right. Yeah. And you know I’ve had clients who work for international schools. They’re ex-pats working in the Middle East or in Hong Kong or China and have real estate here. They want to purchase additional investment property. And again, it’s not defined by whether you are a Canadian citizen it’s defined by where your income is earned there and outside of Canada, you’re non-resident. And you must have 35-percent down.

Details matter!

Lawrence: [00:12:12] Wow. So it sounds like a lot of details. I really highly recommend that if anyone has a particularly unique situation to talk to with Chris, so you can figure out the little nuances of where you live, where your residency is, whatever property your own, where you earn your money, where your spouse lives all that kind of stuff. So it sounds like there’s a lot of different options that really you should talk to a professional to figure it out.

Chris: [00:12:38] Thank you. Thank you, Lawrence. Yes, the door is open to anybody. You can visit my website, or find me on Facebook at @tridacmortgage or just Google Chris Molder, you’ll find me there. I can’t hide.

Lawrence: [00:12:53] Can’t hide! So that’s it! If you have any questions, please call Chris Molder at Tridac Mortgages. Have a good day.

Chris: [00:13:00] Thanks, Lawrence.

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Christopher Molder

Mortgage Broker

Christopher is a mortgage broker based in Toronto, Canada. And a son of a broker too. He’s a second generation mortgage broker. Following in his father’s steps he joined the family mortgage business straight out of university.