Getting a Mortgage with Foreign Income
October 12, 2021 | Posted by: Ron Chan
This article is not about foreign investors who are looking to buy a home in Winnipeg. That’s a whole other (and ever-changing) conversation that begins with the Federal Government’s current two-year moratorium on overseas purchases of real estate in Canada. It’s a deep and dark rabbit hole.
Instead, this feature is for Winnipeg residents who happen to earn some or a significant portion of their declared income in another country. After the economic lockdowns of 2020-21, a new wave of freelancers and contractors entered the entrepreneurial fold in Manitoba. To grow income potential in trying times, they looked across the border and over the Atlantic/Pacific to secure contracts, clients, and sales. Seeing as you’re reading this, you’re probably one of these ambitious individuals, and you should be applauded for adapting and capitalizing on global opportunities. However, you find yourself uncertain in another area - real estate. When you were earning income solely in Canada it was all very clear cut. You would take your income statements from the last couple of years along with your credit score to the bank, and apply for a home loan. Simple, right? But now that you’re earning income outside of the Canadian “wall” you’re concerned that getting a mortgage will be complicated, even though you’re a longstanding citizen and/or resident. Will it be problematic, or will you be able to capitalize on low mortgage rates and affordable prices for Winnipeg homes? Here’s what you need to know.
What Canadian Citizens/Residents Need to Know About Getting a Mortgage When Earning a Significant Portion of Income from Foreign Resources
Declared Income is Declared Income
As long as you’re in good standing with the Canada Revenue Agency (CRA) in regards to your income, you’re all set. If it’s good enough for the CRA, it’s good enough for BMO, CIBC, RBC, TD, and so forth (all else equal).
While everyone’s income scenario varies, the process is fairly straight forward. If you live in Canada, earn income in the USA (etc), and pay taxes there - you are required to declare this in Canada. Typically, you would only owe the difference between American and Canadian taxes. For example if you paid 30% taxes in the US, and would owe 40% in Canada on the same income – you normally pay the difference. Your accountant can clear this up for you, or you can simply call the CRA to inquire if this is your first fiscal year for declaring foreign income. In some cases, a Notice of Assessment from the CRA, or a T1 showing foreign income may be required as documentation.
Ultimately, lenders care about assets, credit history, consistent income, and what your “take home” looks like - how your income gets divided between the CRA and foreign revenue agencies is not really their concern.
Otherwise, All Other Processes Apply
Again, seeing as you’re earning foreign income directly (and not through an employer) you are likely a self-employed person. If so, the process for a freelance contractor seeking a mortgage applies. We have already prepared guides for you. Please reference what is required for getting a mortgage when self-employed and if you have recently started your business, use this helpful resource.
Working with a Mortgage Broker is Even More Important
It doesn’t matter what your income status looks like, as there are a number of important benefits to using a mortgage broker. But for those who earn some or all of their income from foreign soil, it’s considered essential by most experts. While we cleared up the fact that you can successfully apply for a home loan, it’s best to have a local mortgage broker approach lenders and manage the process for you. It’s the only way to ensure that all “i’s” are dotted and “t’s” are crossed. And if there are complications with the big banks, a broker can provide other options to accessing funds to buy a home. For instance, you may have just stared earning foreign income, and like with anyone starting a new job, banks may shy away and consider you to be too much of a risk. In such a case, a broker can provide you with access to alternative/private lenders who are more flexible when it comes to qualifying for a home loan.
Ron Chan is experienced in managing mortgages for those who earn income from foreign resources. Contact Ron today at 204.290.9950 for a friendly conversation about what is required, and more importantly - what YOU want in regards to terms. He’ll make it happen.
Getting a Winnipeg Mortgage While Earning Foreign Income?