The job market and economy isn’t what it used to be. Mike had worked for many years in Canada’s well-paying resource sector but like many others lost his job as international employers abandoned Canada in favour of other parts of the world with less political interference and more investment certainty. With a wife and young children to support, Mike did what he had to do and searched for work overseas. Finally, he got an offer and took up employment with a large multi-national engineering firm with headquarters in the Netherlands and to be paid in Euros.
On his first month off, Mike flew back to Canada to spend time with his wife and family and take steps to re-stabilize their lives. One important objective was to re-enter the housing market. When Mike lost his job, he and his wife, Cathy, had made the difficult decision to sell their home and move into his parents’ basement until he was re-employed. Upon that sale, they had banked the equity which they used for living expenses while saving the rest for a future down payment, so that was all good. Now that he was back working, was there any hope to get a mortgage and a place to call home any time soon?
Mike's question was simply:
"Can I get a mortgage to purchase a home in Canada if I work and earn my income abroad in a foreign country?"
Under Canada’s standard mortgage qualifying rules, lenders require that foreign income show up on the borrower's T1-General tax return for 1-2 years running. Otherwise, a typical down payment using foreign-earned income would be 35% or more.
Further, lenders generally require an employee to be non-probationary (3+ months under their belt) with their current employer and guaranteed hours.
In Mike's case, he was only 1 shift and 1 pay cheque into his new job and to further complicate things, he was being paid in Euros into a Netherlands' bank account.
Good news for Mike (and borrowers like him) is that there are some “alternative” lenders in Canada that are more flexible with the rule books and able to mortgage-qualify Mike under certain conditions.
Here’s what they came up with:
- He and his wife Cathy needed to be Canadian and have or establish that they would have ties in the community that they intended to buy in. As their kids were already registered in a Calgary school and local sports programs, that was easy.
- Cathy and the kids needed to occupy the home full-time, which was to be the case.
- Home needed to be in a larger population centre (no rural or small town)
- They needed at least 20% down payment, and more if the property exceeded $750K. Mike and Cathy had saved the equity from selling their previous home, so that was OK
- At least one pay stub needed to be in-hand and on deposit in his Netherlands' bank account.
- Employment confirmation letter from Mike's employer in English describing nature of his employment, shift and salary.
- Lender advised they would need to see some of the income had been exchanged and transferred into his Canadian bank account, which was the case as all his bill where in Canada.
- Lender would give Mike credit for years of previous work experience in the industry and waive the 3-month probationary period
- Credit report showed they payed their bills on time and as agreed,.
- Lender indicated that a 2 or 3-year mortgage would be available at a decent rate. Mike understood that that time frame was selected to allow him sufficient time to get his foreign income showing up on his Canadian tax-returns whereupon he could shift to a traditional mortgage lender in due course.
- Mike understood that he would have to be present in Canada when meeting with a lawyer to sign the legal documents.
All this sounded good to Mike & Cathy and they started their property search. Soon they'd have a home-to-call-their-own again!
If this solution might apply to you or someone you know, please reach out or share! Happy to help.