Posted On Nov 12, 2024
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Canada's Prohibition on the Purchase of Residential Property by Non-Canadians Act has created some new rules for foreign citizens looking to buy property in Canada. This two-year ban, effective January 1, 2023, restricts non-residents from purchasing residential property. However, there are a few key exemptions and scenarios where foreign citizens can still acquire property and get a mortgage, even with less than two years in Canada.
If you’re a foreign citizen interested in purchasing property in Canada, here’s what you need to know about navigating the new restrictions.
1. Temporary Residents with a Valid Work Permit
If you’re a foreign citizen working in Canada with a valid work permit, you may still qualify to purchase a home and obtain a mortgage. Work permit holders can demonstrate their intent to stay in Canada and establish roots through employment, which is generally considered under the act’s exemptions.
Key Requirements for Work Permit Holders:
- A valid, unexpired Canadian work permit.
- A history of working in Canada, which may help strengthen your mortgage application.
- Ability to meet mortgage criteria, like income verification and credit history.
For many lenders, your employment history and work permit status can provide sufficient assurance of stability in Canada, making it possible to secure a mortgage.
2. Students with a Valid Study Permit
Students studying in Canada on a valid study permit may also be able to buy a property under certain conditions. Many foreign students spend several years in Canada and may choose to buy rather than rent. If you’re a student, some lenders may consider your study permit as an exemption.
Key Requirements for Students:
- A valid Canadian study permit.
- Proof of enrollment in a recognized Canadian educational institution.
- Financial stability or a reliable source of funds (like a family sponsor or stable savings).
Students should also keep in mind that, while they may be exempt from the ban, they will still need to meet Canadian mortgage requirements, including a verified down payment and a good debt-to-income ratio.
3. Family Sponsorship and Spousal Exemptions
If you’re a foreign citizen married to or in a common-law partnership with a Canadian citizen or permanent resident, you may qualify through family sponsorship. Spousal or family sponsorship pathways provide another route to acquire property.
Key Requirements for Family-Sponsored Buyers:
- Proof of your relationship with a Canadian citizen or permanent resident.
- Sponsorship documentation showing intent to apply for permanent residency.
- Meeting regular mortgage requirements, like a sufficient down payment and verifiable income.
This exemption can help foreign citizens purchase a home sooner, as it demonstrates an intention to settle permanently in Canada.
4. Indigenous Rights and Cross-Border Communities
If you have Indigenous rights recognized under section 35 of Canada’s Constitution Act, 1982, you are also exempt from the foreign buyer ban. This may apply to certain Indigenous individuals whose communities span borders, particularly those with established cross-border ties in North America.
Important Considerations for Foreign Citizens Applying for Mortgages
Even with an exemption from the foreign buyer ban, qualifying for a mortgage in Canada as a foreign citizen requires meeting standard mortgage criteria. Here are some essential factors lenders will review:
- Credit History: If you have no Canadian credit history, you may need to provide a credit report from your country of origin, or in some cases, a letter from your bank.
- Income Verification: You’ll need to provide proof of stable income, such as pay stubs, bank statements, or tax records.
- Down Payment: Down payments for foreign buyers may need to be verified as being on deposit in a Canadian financial institution for at least 30 days before closing.
- Debt Ratios: You’ll need to meet Canada’s debt-to-income ratio standards, with a Total Debt Service Ratio (TDSR) generally around 40%.
Final Tips for Foreign Citizens Interested in Buying Property in Canada
If you meet one of the exemptions, it’s a good idea to consult both a mortgage professional experienced in non-resident lending and a real estate lawyer familiar with the foreign buyers ban. They can help guide you through the process and ensure you’re eligible for a mortgage under Canadian regulations.
In summary, while Canada’s foreign buyer ban places restrictions on non-residents, there are pathways for temporary residents, students, family-sponsored individuals, and certain Indigenous persons to still purchase property. Understanding your eligibility and meeting mortgage requirements are essential steps for success in Canada’s real estate market.
Still have questions? drop me a line or text to 1-587-404-6393 or rik@tmcweconnect.ca