Mortgages when your credit history is in another country

The single most common surprise for a recent arrival with a strong financial record is that none of it is visible here. Immigration, Refugees and Citizenship Canada puts it plainly on its own homebuying page: "If you're new to Canada, banks here may not recognize your credit history from another country."

That is a documentation problem, not a disqualification. This page sets out what the published federal rules and CMHC's own product documentation say. It is not financial advice, and mortgage arranging in Ontario is a licensed activity — see who you actually work with.

What a Canadian credit file is, and how long it takes

A credit report is a record held by a credit bureau of how you have used credit in Canada. It is created when you first borrow money or apply for credit here. Lenders report to the bureaus, the bureaus update at least monthly, and a credit score — a three-digit number, on a scale the Financial Consumer Agency of Canada gives as roughly 300 to 900 — is derived from it.

Length of history is one of the factors that moves the score. That is the part a newcomer cannot shortcut, and it is why IRCC's advice is to start as soon as you arrive rather than when you start house-hunting: "If you want to buy a home, start building your Canadian credit history as soon as you can."

The minimum down payment is set by price band

The Financial Consumer Agency of Canada publishes the minimum down payment as a function of purchase price:

Purchase price	Minimum down payment
$500,000 or less	5% of the purchase price
Over $500,000 and under $1.5 million	5% of the first $500,000, plus 10% of the portion above $500,000
$1.5 million or more	20% of the purchase price

Below 20% down, you will typically need mortgage loan insurance. This is worth being clear about, because the name misleads almost everyone: it protects the lender if you cannot pay. It does not protect you. What it does for you is make a smaller down payment possible, and FCAC notes it generally comes with a lower interest rate.

The premium is a percentage of the mortgage, and FCAC gives the range as 0.6% to 4.5% depending on the size of your down payment. It can be added to the mortgage, in which case you pay interest on it. One item specific to buying here: Ontario applies provincial sales tax to the premium, that tax cannot be added to the mortgage, and it is payable when you get the mortgage — so it lands in the closing costs. The closing-cost calculator covers the rest of what falls due that day.

FCAC directs readers to three mortgage insurers for premium schedules — CMHC, Sagen and Canada Guaranty. Everything below is CMHC's published product; the others publish their own terms.

What CMHC's newcomer product actually says

CMHC publishes a product called CMHC Newcomers, and its terms answer several of the questions people are usually guessing at.

Who it is for. Borrowers with permanent resident status, and non-permanent residents who are legally authorized to work in Canada — for example on a work permit. CMHC states there is no minimum period of residency. For non-permanent residents it is homeowner loans only, on properties of one to four units, with at least one unit owner-occupied.

Credit. At least one borrower or guarantor must have a minimum credit score of 600. Where Canadian credit history is limited, CMHC says it may consider an international credit report, a letter of reference from the borrower's financial institution in their country of origin, and other alternative methods of establishing creditworthiness.

That second item is the practical one. A reference letter from your bank in your country of origin is a document you can request before you leave, or ask a family member to obtain, and it is much easier to get while you still have an active relationship there than two years later. If you are arriving and expect to buy within a few years, collect it early.

Down payment. For homeowner loans on one- to two-unit properties, the minimum equity requirement is 5% of the first $500,000 of lending value and 10% of the remainder — the same shape as the federal minimum above. Ten per cent for three- to four-unit properties.

Price and amortization limits. The maximum purchase price or lending value must be below $1,500,000 for homeowner loans. CMHC gives the maximum amortization on this product as 25 years, noting that buyers may qualify for a 30-year amortization through a separate product, CMHC Home Start.

Qualifying rate and debt ratios. CMHC states that debt service ratios must be calculated using an interest rate that is the greater of the contract rate plus 2%, or 5.25% — so the payment you are assessed against is not the payment you would make. The maximum ratios are 39% gross debt service and 44% total debt service. You can see what that does to a real payment in the mortgage calculator, which compounds semi-annually the way Canadian mortgages actually do.

One restriction that specifically catches non-permanent residents. CMHC allows non-traditional down payment sources — an unsecured personal loan or line of credit — on one- to two-unit properties at high loan-to-value, but states that non-permanent residents are not eligible for that. If you are on a work permit, the down payment needs to come from traditional sources: savings, the sale of a property, or a non-repayable gift from a relative.

And the one that ties back to the other page. CMHC's newcomer page states that the purchase must not be subject to any prohibition under the Prohibition on the Purchase of Residential Property by Non-Canadians Act, and that only borrowers exempt from that Act may be considered. Financing does not route around eligibility — see can a newcomer buy a home in Canada right now.

Bringing the down payment into Canada

If part of your down payment is arriving from abroad with you, there is a reporting rule and it is easy to comply with and expensive to ignore.

The Canada Border Services Agency states there is no restriction on how much money you can bring into or take out of Canada, and doing so is not illegal — you just have to declare it. Whether entering or leaving, you must declare currency or monetary instruments valued at CAN$10,000 or more, in Canadian or foreign currency or any combination. "Monetary instruments" includes cheques, money orders, bank drafts, traveller's cheques, stocks and bonds. The same obligation applies to funds sent by mail or courier, and to money you are carrying on behalf of someone else.

Failing to report can result in the funds being seized.

Separately, expect your lender and your lawyer to ask where the down payment came from and to want it documented. That is a standard anti-money-laundering requirement rather than suspicion of you, and gift money from a relative generally needs a signed letter confirming it is not repayable.

What to line up

None of this is fast, and most of it can be done before you find a house:

• Open a Canadian credit account and use it, from as early as you can.
• Ask your bank in your country of origin for a reference letter, and get your international credit report if one is available there.
• Keep records of how the down payment was accumulated and moved.
• Talk to a mortgage professional licensed by the Financial Services Regulatory Authority of Ontario before you set a budget, not after — the qualifying rate above means the price you can offer is not the price your own arithmetic suggests.

The tax and closing costs that sit on top of the purchase price, several of which turn on your status, are covered in what a newcomer pays on top of the price in Ontario.