Transcript of Video Blog:
Hi everybody, it’s Rowan Smith with the Mortgage Centre. Today I’m going to talk about non-resident mortgages. So a non-resident is somebody who is defined as not living within Canada but trying to buy real estate here.
It may be for rental purposes, it may be for a second home or vacation property… whatever purpose they see. So the first question everybody asks is: “How much down-payment is required?”
Well, typically, banks are going to want to see at least 35%, possibly as much as 50%, depending on which institution you’re dealing with. You may say: “Wow, that’s a lot of money! Why so much?”
Well, if somebody lives in another country — Afghanistan or in Japan or something like that — how is the bank going to go after them for a shortfall? In the event that there is a foreclosure and they can’t make the payments and they have to take the property, if there is a shortfall, how could the bank go after that in another country?
The answer is it’s horribly expensive, very unlikely to proceed and frankly, the banks just don’t even want to get involved in it. So instead, what they want to do is make sure that the person putting down payment on the property puts enough down that should they need to foreclose and take the property as their sole source of recourse, that there will be enough equity in the property that they’ll sell it and get their money back.
35% is generally considered within the industry to be a safe number and that’s what most banks will want. However, if you’re dealing with a smaller financial institution or credit union and you’re a non-resident, they simply cannot — due to the laws that govern credit unions — deal with you.
So you’re going to have to deal with one of the big banks and even then, they’re going to make it a little more difficult with requiring 35% down or more and wanting you to prove your income in your home country and can service your housing costs there, as well as the housing costs for the new property.
So if you know somebody who is a non-resident and they’re looking to try and buy a place in Canada, get them to call me first. This is Rowan Smith for the Mortgage Centre.