Changing the rules; New mortgages allow more immigrants to buy real estate
The Ottawa Sun
Fri 22 Feb 2008
Immigration is nothing new to Canada, with 250,000 immigrants arriving in this country every year. And with so many arriving, it should come as no surprise that 20% of the Canadian population is now foreign-born, according to Statistics Canada.
It should also come as no surprise that increasingly, immigrants are making their numbers felt in the housing market as they get settled and make the transition from renter to home owner.
Invis, Canada's largest mortgage brokerage firm, says that the influence of immigrants on real estate markets across the country will grow in the decades to come as the Canadian population ages and more newcomers arrive in this country.
However, there are home-ownership hurdles faced by immigrants that Canadian-born residents don't encounter.
"While many new immigrants to Canada would like to join in the investment advantages and pride of home ownership, they often face barriers when buying a home," says Invis' Jim Rawson. "One of the biggest challenges for new immigrants is establishing credit because they often don't have a financial history in Canada."
Rawson points out that without a credit history, it can be a struggle to get mortgage financing from traditional financial institutions. A 2007 study on the home-buying experiences of immigrants suggested that 91% of new immigrants said buying a home was important, yet nearly 75% of respondents felt the lack of credit history was a barrier.
A second home-ownership hurdle is that many financial institutions have traditionally insisted that new immigrants provide a downpayment of between 25% and 35%.
However, this is starting to change as more and more lenders in Canada begin to offer mortgages tailored to the needs of new immigrants, including those with non-landed status. These mortgages feature looser rules regarding proof of credit history and a much lower downpayment requirement -- up to 100% financing is available in some cases.
These mortgage product changes will help fuel the real estate sector, especially since many immigrants settle in Canada's larger -- and expensive -- cities.
Rawson adds that immigrants should shop around and get expert advice.
"It is important that newcomers know their options and explore mortgage choices before jumping into home ownership."