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Temporary Residents and Mortgage

Last updated on December 17, 2023

As we know, temporary residents are people who are holding Study Permit (international students) or Work Permit (include Open Work Permit, Close Work Permit, and Post Grad Work Permit). In this discussion, we only mention who has Work Permit because if international students would like to buy a house, they have to pay 100%.

At first, we will explain why international students can’t mortgage. It’s very clear as the loan term usually is set from 20 to 30 years by banks or financing companies, but you probably move out of Canada at any point of time. Moreover, you don’t have any income to prove your payment ability.

So, for the individual who has Work Permit, your income will be one of the fundamental things to persuade the banks. The mortgage limit will be depended on many factors such as status, income, credit scores, etc. In the ideal scenario, the mortgage limit could be up to 4 times of annual salary. Next is about the interest rate, there are many people who wonder what is the difference compare to permanent residents? Actually, it’s the same.

The way to have a house with a mortgage is that you have to down payment an amount, then you ask for a loan the rest of the house’s value from banks or financing companies.

  • If you down payment under 20% of the house’s value, you have to pay the insurance for the mortgage. You can choose to pay this fee immediately or combine it with the monthly/bi-weekly payment that divided for the loan term.
  • If you down payment from 20% of the house’s value, you don’t have to pay more any fee.

As we mentioned above, the loan term is usually set from 20 to 30 years. Some people may ask if I bingo the lotto, so can I pay the entire rest in advance? Yes, you can; however, you will need to pay the penalty fee. This fee will be calculated based on the rest amount and the interest rate at that moment. Nevertheless, this rule is applied for a fixed-rate mortgage, you can choose another option which is a float rate mortgage. This option allows you to pay the entire mortgage at any time, and of course, the rate of this form is higher.

In the current situation, due to the COVID-19, the interest rate is pretty low that can be considered as a good time to mortgage. The alumni or international students who almost graduate can think about a mortgage to have your dream house. You should have Work Permit, Passport, bank statement, T4, and paystubs to request a pre-approval from the bank. Then, you will know how much you can mortgage.

Now we will talk a little about if you are a Permanent Resident (PR), the difference between PRs and WP holders is the mortgage limit. Besides, you have to down payment of at least 35% of the house’s value (if you are PR under 5 years). However, banks do not ask you to prove your job or income. You only need to make a reasonable payment plan which will be helped by mortgage advisors at banks.

We hope this discussion will help you who would like to be settled in Canada will have your own house soon. If you have any more questions, don’t hesitate to contact any banks that you prefer to have more advice.

(From RBC’s advisor)

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