Mortgages in Canada

Basic Mortgage FactsMortgages in Canada

Max 50% loan to value $100,000 minimum loan

Rates from 2.74%

Famous for the Rocky Mountains and awe-inspiring natural wonder of Niagara Falls, Canada is as varied as it is vast. Bordering three oceans and spanning six time zones, it is the second largest country in the world. This amazing area encompasses deep blue lakes, snow capped peaks, dense forests, golden prairies, enormous fjords, sleepy fishing villages and vibrant cosmopolitan cities. Its sheer breath-taking beauty and living space are stimulating more and more Brits to make their home here.

Another positive factor is Canada’s property market, which emerged relatively unscathed from the global financial crisis. The country’s long-running housing boom seems to show no signs of ending, with national home sales increasing by 9.4 per cent on a year-on-year basis in March, according to the Canadian Real Estate Association (CREA). However, when excluding Greater Vancouver and Greater Toronto, which are the only two hot spots for home sales and prices at present, the national sale price is a more modest 2.4 per cent. Price gains in these two markets are being fuelled by a shortage of single family homes for sale in the face of strong demand. Meanwhile, supply and demand for property is well-balanced among the vast majority of housing markets elsewhere across Canada, according to CREA.

Economists continue to debate whether the country’s property prices are sustainable over the long term or the sign of a housing bubble. The Bank of Canada agrees that the country’s housing is overpriced, but that overvaluation doesn’t necessarily mean the market is in need of a 10-to-30-per-cent downturn to bring it back into balance. It says that rising incomes as the economy gains momentum could help close the affordability gap, without a sharp drop in home values. Eligibility criteria for mortgages have become tighter over recent years, but you can still generally borrow up to 50 per cent of the value of a property and the minimum loan is $100,000. Rates start from just 2.74 per cent for a one-year fixed deal, and 2.84 per cent for a 5-year fixed deal.

A key calculation used in the application is the debt-to-income ratio, which establishes whether you can afford to maintain the mortgage repayments, so your existing liabilities including loans, credit card payments and maintenance are taken into account, together with the proposed Canadian mortgage payments. All of this must not exceed 35 per cent of your gross monthly income. Lenders will be looking for very detailed information about your financial status, so it’s important to have your paperwork in good order. Your chances of being accepted for a mortgage will increase if you can prove that you’ve got a sound financial profile.

As always, it’s imperative to take professional advice before making any decisions. Prospective buyers should always go through the same process that they would follow if they were buying a property in the UK, and this includes consulting a good independent lawyer, and ensuring that an independent valuation of the property takes place, even if it’s a cash purchase. There’s nothing to be gained, and everything to lose, by cutting corners and taking unnecessary risks. One of the most effective ways of obtaining a mortgage for a property purchase in Canada is to use a specialist broker in the UK. They’ll know the exact mortgage application requirements and can source the best possible deal. It can also put buyers in touch with specialists in Canada, to ensure that they comply fully with planning and legal conditions, and can also assist with currency exchange.

Download your free Canadian Emigration Guide