New to Canada Program by
If you’re a new immigrant, it’s likely you don’t have a credit rating in Canada, and you may not yet qualify for permanent residency, which means you’ll be ineligible to secure a mortgage through a traditional lender. This is where New to Canada mortgages, like the one offered by Sagen, provide an alternative source of mortgage financing.
Those who have immigrated or relocated to Canada with the last 5 years are eligible for the New to Canada program, provided by Sagen. Under this program, homebuyers may be able to purchase a property with as little as 5% down payment.
Below are some of the most important details you need to know if you’re considering applying for this program.
Acceptable loans and loan-to-value limits
The loan to value ratio (LTV) is a tool employed by financial institutions to assess the risk associated with lending to a client. Usually, the higher the LTV ratio, the riskier the loan.
The LTV limit under this program is 95%. If the property value is ≤ $500,000, a 5% down payment is required. Properties with a value > $500,000 and < $1,000,000 require a 5% down payment up to $500,000, with an extra 10% down payment on the portion of the property value above $500,000.
To qualify, the primary criteria are that you must have relocated to Canada within the last 5 years and have a valid work permit or permanent resident status.
Standard income and employment verification are required; this means you must show proof of 3 months full time employment in Canada.
Standard documents to provide for a guaranteed hourly or salary job would be a recent paystub and employment letter. If you have fluctuating income such as hourly (with no guaranteed hours), commission, self-employed etc. then standard requirement is providing tax documents for the last 2 years to get a 2-year average of income. For example, if you have recently located to Canada and started a job paying 100% commission, we would not be able to use your income to qualify for a mortgage until you have been at that job for 2 years. However, if you have been at that job with fluctuating pay or self-employed for 2 years and have the appropriate documentation then we could use your income in the mortgage application.
A large part of qualifying for a mortgage has to do with your credit score. If you are new to Canada you may not have established credit and therefore would need to provide the following depending on your LTV.
- 90.01-95% LTV: International credit report (Equifax or Transunion) demonstrating a strong credit profile OR Two alternative sources of credit demonstrating timely payments (no arrears) for the past 12 months. Alternative sources required are: Rental payment history AND another source such as, utility bill, telephone, cable, cell phone, auto insurance.
- Up to 90% LTV: Letter of reference from a recognized financial institution OR six months of bank statements from primary account
When it comes to securing funds for a down payment, you must use traditional sources, such as personal savings, non-repayable gifts from immediate family members or proceeds from the sale of personal assets.
The required debt service ratios are as follows: GDS 39%/TDS 44%. All debts held outside the country must be included in the TDS ratio.
Marketable residential homes are eligible, provided they have an estimated economic life of at least 25 years. New properties under construction are also permitted (provided they are covered by the New Home Warranty Program), as are existing resale properties.
To meet eligibility, the value of the property cannot exceed $1,000,000.
Fixed, variable, and adjustable rates mortgages are allowed. The maximum interest rate term permitted is 25 years, and the qualifying interest rate is the greater of the contract rate or 5-year benchmark rate. Amortization schedules up to 25 years are allowed.
There is a mortgage insurance premium that will have to be paid at the time of closing. It may be added onto the mortgage and is non-refundable.
As with all mortgage insurance, the higher the LTV ratio, the higher the premium you’ll have to pay.
Learn more about the New to Canada Program by Sagen