Newcomer mortgage options in Canada

Who is considered a newcomer to Canada?

In the context of mortgages, a newcomer is generally defined as an individual who has immigrated to Canada within the last five years and is in the process of establishing their financial foundation. Most lenders and government programs designed for newcomers align with this definition, though specific criteria may vary slightly between institutions.

Mortgage eligibility criteria for newcomers

Here are the key eligibility criteria to apply for a newcomer mortgage in Canada:

• Must have immigrated to Canada within the last five years to qualify for “New to Canada” programs.
• Permanent residents are eligible for traditional and newcomer-specific mortgages with proof of status (e.g., PR card or COPR).
• A minimum down payment of 5% is required for permanent residents, while non-permanent residents usually need at least 10%.
• Proof of steady income through pay stubs, job letters, or employment contracts is required (3–6 months of employment history may suffice).
• A credit score of 660 or higher is preferred for favorable rates; programs are available for those with no Canadian credit history.
• Total monthly housing costs (mortgage, taxes, utilities) should not exceed 39% of gross income; total debt payments must stay under 44%.

Can non-residents buy homes in Canada?

As of January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act has imposed restrictions on the ability of foreign investors to purchase residential properties in Canada. The Act, introduced as part of the government’s efforts to tackle housing affordability, prohibits non-Canadian citizens, non-permanent residents, and foreign commercial enterprises from buying residential properties.

However, temporary residents in Canada, such as individuals on valid study or work permits, are still eligible to purchase homes under specific conditions. For example, temporary residents must demonstrate their intent to settle permanently in Canada by meeting criteria such as filing Canadian tax returns for a certain number of years and showing a consistent physical presence in the country. Additionally, there are purchase price limits, with some cases restricting the property value to $500,000 or less. These rules aim to ensure that temporary residents with a genuine connection to Canada can still access the housing market.

How to get a newcomer mortgage in Canada

Canadian lenders understand the unique challenges newcomers face and offer tailored programs to help you realize your dream of homeownership. Let’s break down the process into simple, actionable steps to help you navigate the process.

Determine how much you can afford

Before beginning your home search, it’s essential to calculate how much you can comfortably afford. Start by considering your down payment, which is at least 5% of the purchase price for permanent residents and typically 10% or more for non-permanent residents. Factor in your monthly housing costs, including mortgage payments, property taxes, and utilities, to ensure they fit within your budget. Lenders also assess your total debt payments, which should not exceed 44% of your gross income. 

To make this calculation easier and more precise, use our mortgage affordability calculator.

Build your credit

An important step to getting a mortgage in Canada is to build your credit rating. A strong credit rating will help you get a better mortgage rate, which could save you thousands of dollars in interest charges over the life of your mortgage. Here is a list of activities that will help you build your credit:

• Apply for, use and pay off a credit card each month
• Pay your bills in full and on time, including rent, utilities and telecommunication services
• Apply for small loans from your bank and make regular payments
• Prove that you have a consistent source of income by staying with the same employer for an extended period of time

If you don’t have a strong Canadian credit rating, you can also use an international credit report.

Read more: How to get a mortgage with bad credit

Save for down payment

As you’re building your credit, you can also start saving a down payment for your home purchase. 

If you're buying a home with a purchase price of $500,000 or more, the minimum down payment is 5% of the first $500,000, and 10% of any amount over $500,000. This rule applies regardless of your residency status. 

However, the size of your required down payment will vary based on whether or not you’re a permanent resident, and whether or not your mortgage is insured.

If you are a permanent resident, the usual down payment rules apply: you must make a minimum 5% down payment on your home purchase to take out an insured mortgage or a minimum 20% down payment to take out an uninsured mortgage.

If you are a non-permanent resident, you can also put 5% down and take out an insured mortgage. However, if you wish to take out an uninsured mortgage, the lender will require a larger down payment – often up to 35%.

The bigger your down payment is, the smaller your mortgage payments could be.

Calculate your mortgage default insurance premium

In Canada, if you put down less than 20% of the purchase price of your home, you would be taking on a high-ratio mortgage, also referred to as a “transactionally-insured” mortgage. High-ratio mortgages require mortgage default insurance, which protects the lender in case you can’t make your mortgage payments and default on your loan. This insurance coverage is paid for by the borrower, and the premiums are added to the overall cost of your mortgage. If you put down 20% or more, you won’t need to purchase mortgage default insurance, so you can move on to the next step. But if you’re making a payment between 5-19.99%, here’s how you can calculate your premium.

Let’s assume you’re buying a house priced at $350,000 and making a 10% down payment that equals to $35,000.

Step 1: Calculate mortgage amount

Mortgage amount = Home price - Down payment

$350,000 - $35,000 = $315,000

Step 2: Calculate insurance premium

Insurance premium = Mortgage amount x Insurance premium percentage

$315,000 x 2.40% = $7,560

Step 3: Calculate new mortgage amount

New mortgage amount = Mortgage amount + Insurance premium

$315,000 +  $7,560 = $322,560

Use our mortgage default insurance calculator to estimate how much the premiums might cost you under different down payment scenarios. 

Also read: Insured vs. uninsured mortgages – what’s the difference?

Choose a mortgage provider

In Canada, you can either get a mortgage through a lender, like a bank or a credit union, or you can work with a mortgage broker. Mortgage brokers work for you, by shopping around for the best mortgage rates and products available in the market. Brokers don’t issue mortgage loans themselves, but instead negotiate on your behalf for better rates and products offered by lenders.

Tip: If you are using the CMHC Newcomer Program, make sure your lender is approved by the CMHC (Canada Mortgage and Housing Corporation).

Select your mortgage amortization period and term

The amortization period is the total time it takes to repay your mortgage, usually between 25 - 30 years, depending on the size of your down payment. However, as of December 15, 2024, new regulations apply for down payments under 20%: 

• If you’re a first-time buyer or purchasing a new build, you may now qualify for a 30-year amortization period, even if your down payment is less than 20%. 
• For all other cases, the maximum amortization period remains at 25 years for insured mortgages.

Buyers who put down more than 20% of the purchase price will have access to a 30-year amortization. 

Your mortgage term is the amount of time you commit to one mortgage rate and one set of conditions with your lender. Mortgage terms are between six months and 10 years, with five years being the most common. When your term is up, you will need to negotiate a new term on the remaining principal, with a new mortgage rate and new conditions. You will likely have many mortgage terms throughout your amortization period. Just remember to choose each mortgage term carefully; breaking your mortgage term early could result in a very expensive prepayment penalty.

Also read: Mortgage term vs. amortization

What if you don’t have a Canadian credit history?

If you’re new to Canada and have a weak Canadian credit history, you’ll need to provide some specific supporting documents to show you have built up credit in other ways. Some of the documents you may need to provide include:

• A valid work permit or landed immigrant status
• Proof of income through either an employment contract or pay stubs
• Proof of 12 months of rental payments and/or a confirmation letter from a landlord
• Regular payments towards utilities, telecommunications, insurance, etc. and/or confirmation letter from service provider(s)
• Letter of reference from a recognized financial institution
• Several months of bank statements
• Documented regular savings for 12 months
• An international credit report

Gathering this information beforehand will help to apply for mortgage for newcomers in Canada programs.

Mortgage Default Insurance for newcomers in Canada

There are three providers who offer mortgage default insurance through their own New to Canada Mortgage Programs: CMHC, Genworth Financial and Canada Guaranty. CMHC is the most popular of the three, but all of them offer the same premium rates, as seen below. 

1. Canada Mortgage and Housing Corporation (CMHC)

CMHC is the largest and most well-known provider of mortgage default insurance in Canada. The government-backed corporation plays a significant role in making homeownership accessible for both Canadians and newcomers.

Their CMHC Newcomers program allows individuals with no or limited Canadian credit history to qualify for a mortgage. They consider alternative credit documentation, such as international credit reports, proof of rent payments, and utility bills.

2. Sagen

Sagen is a private mortgage insurance provider offering flexibility and innovative programs to meet diverse needs, including those of newcomers. Its New to Canada mortgage program allows alternative credit documentation, such as rental payment history, utility bills, or a letter of reference from a recognized financial institution, making it ideal for individuals who may not meet traditional lending criteria. 

Eligible newcomers must have been in Canada for five years or less, hold permanent residency or a valid work permit, and provide a minimum down payment of 5% for homes up to $500,000 or 10% for amounts above $500,000 and below $1,500,000.

3. Canada Guaranty

Canada Guaranty is another private insurer that focuses on providing tailored solutions for homebuyers, including newcomers and first-time buyers. Their Maple Leaf Advantage program is specifically designed for newcomers who have been in Canada for five years or less. This program considers both Canadian and international financial documentation to determine eligibility.

References and Notes

1. Any of the New to Canada programs offered by CMHC, Genworth Financial or Canada Guaranty Mortgage Insurance.
2. Either a Canadian credit report or a recognized International credit report.
3. To learn more about alternative credit reporting, see below.
4. If you are putting down more than 20% of the value of your home as a down payment, but have a weak credit history, you may still need to purchase mortgage default insurance.

 

For further information, check out these helpful pages:

• The best bank accounts for newcomers to Canada
• Financial tips for newcomers 
• How your credit score affects your mortgage
• First-Time Home Buyer Loans