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Buying a property in Canada can be a big challenge for you, and it can be confusing for new immigrants who may not know the process of property purchase in Canada. Many newcomers do not yet understand the details; and some thoughts — like one has to have a credit history to get a mortgage — are not necessarily accurate.
According to a survey by the Bank of Canada, 56% of new immigrants to Canada believe that a Canadian credit history is required to obtain a mortgage. This is actually not true. In fact, it is not so difficult for new immigrants to apply for a Canadian mortgage, and it is easier and more convenient than many people think. Newcomers could enjoy an advantage in Canada: If the down payment is more than 35%, banks do not need proof of their income to approve the mortgage.
Generally speaking, many banks regard immigrants who have landed within 5 years as new immigrants. The date of landing in Canada as a resident is the starting date, and the date of signing a house purchase contract and applying for a mortgage loan is the end date. In addition to the newly landed person being a new immigrant, there are other situations, such as having lived in Canada for a long time before becoming a resident, but may still be a new immigrant.
Each financial institution in Canada has different requirements for the down payment of a property in Canada. Some banks need to see that the down payment has been deposited in the account for three months and provide the source of the down payment.
Some banks, such as CIBC Bank, do not require a sufficient down payment in the account when a client applies for a mortgage. They only need to deposit the down payment or transfer the down payment 15 working days before the delivery of the property. In addition, the down payment for buying a house in Canada can also be a gift from an immediate family member. In this case, the giver and the recipient need to sign a gift letter.
After signing the purchase contract, on the same day, it is necessary to contact and provide the purchase and sale contract to the broker in time. Canadian financial institutions generally approve and then verify. That is, when applying for a loan, the approval is completely based on the information provided by the applicant, so the loan can be approved very fast, usually within 2 days.
However, after the approval, the bank needs to verify the information described by the applicant. For new immigrants, the bank mainly verifies the time of landing, the down payment, and the house price.
Regarding housing prices, one needs to know that banks usually entrust an appraiser to inspect the property. If the appraiser finds that the purchase price of a house in Canada seriously deviates from the market value of the house, the loan amount will be re-examined according to the appraised price, or if the house is illegally remodeled or trace of marijuana cultivation has been found, the bank can even reject the mortgage.
Yes! Canada emphasizes greatly on credit history. From applying for a credit card, buying electrical appliances in installments, buying a car or a house, everything is linked to credit score. If new immigrants want to provide their own credit history, they first need to apply for a credit card. Many banks only provide a credit card with a low limit for new immigrants.
Nevertheless, it is recommended that new immigrants apply for and use this credit card regularly, only in this way, the credit score will gradually improve. Secondly, pay before the expiration of each credit card repayment date, that is, the minimum payment. The internet, telephone and water, electricity and gas should be paid in time.
Fixed interest rate means that the interest rate does not change during the loan period. For example, a 5-year fixed interest rate of 2.8% means that the loan contract expires after 5 years from the first loan, and the interest rate is always 2.8%. No matter how the central bank’s interest rate changes, this interest rate does not change.
Another kind of interest rate is a floating interest rate, which is the central bank interest rate P (prime rate) plus or minus a percentage X%, such as a 5-year floating P-0.8, during the loan period, P will change, but 0.8 remains unchanged, For example, P-0.8%, if P is 3 now, it will be 2.2%. Variable rates, which are subject to change over the term of the loan due to changes in Prime, are generally lower than fixed rates for the same loan term. Whether to choose a floating interest rate can be decided according to the judgment of the very situation.
If a applicant chooses an open loan, the loan can be repaid and released at any time during the loan term without penalty. This loan has a higher interest rate. With a closed loan, there are penalties for paying off the loan early and releasing the mortgage as long as the loan is not due.
In Ontario, the settlement of a Canadian home purchase is done through a lawyer. After the Canadian home loan is finally approved and all loan conditions are met, the bank will clearly instruct the lawyer to release the amount. After receiving the instruction, the lawyer will calculate the cost of the applicant’s real estate purchase, notify the applicant to hand over the balance of the down payment and the delivery fee to the law firm, and invite the applicant to sign the loan documents at the law firm. After the applicant signs the official loan document, The lawyer will issue a demand instruction to the bank. When the real estate is delivered, the bank will transfer the Canadian house loan to the escrow account of the law firm. Finally, the buyer’s lawyer will transfer the full amount to the seller’s lawyer’s account to complete the entire settlement. Get the keys to the new home, and the seller gets paid.
It should be noted that it is at the law firm where the applicant sign the mortgage documents, not at the bank. In other words, only the loan documents signed in front of the lawyer are valid, and the various documents signed before are not formal loan contracts. Some applicants apply for mortgage loans in several banks at the same time, and eventually there will be several loan documents waiting to be signed in the law firm.
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