A sterling credit record in another country does not translate to being able to use equity to buy a home in Canada, according to an advisor.
In her column for MoneySense
, senior editor and licensed agent Romana King outlined the case study of a hopeful home buyer from Mexico who sought her advice on purchasing a Canadian property.
“I own a home in southern Mexico with no mortgage and no outstanding debt. Now, I’d like to take the equity from this home and use it to buy a place in British Columbia. I am a Canadian citizen and, up until now, I’ve been renting a place during the months that I live in Canada,” the would-be buyer’s message read.
“Now, with a few grandchildren around, I want to have a more permanent place in my home country. What do I need to know to make this happen?”
King emphasized the difficulty of cross-border property purchases.
“[It’s] a limitation just about any landed immigrant has to face when settling in our country. Despite what could be a long history of acting like a responsible consumer, [credit] history means little as soon as you cross into our Canadian borders,” she explained. “Truth be told, many countries don’t even have a concept of credit history (the FICO rating system was only adopted in North America in the late 1980s).”
A credit report generated in Canada and outlining a string of transactions within Canada would go a long way towards getting a loan or mortgage, King stated.
“[However,] just because you are a Canadian citizen, doesn’t mean you have a Canadian credit record. If you don’t pay bills in Canada, own and use a Canadian credit card, or make other debt payments to a Canadian institution than you won’t have that much-needed domestic credit history. That means any mortgage you can get will take more and cost more.”
For those who still want to push through with buying, King advised taking exchange rates to heart.
“Not only will you need to convert Mexican pesos into Canadian dollars—to buy that home—but you also need to factor in the current exchange fee you pay to convert Canadian investment funds and retirement pension into Mexican pesos. If you do end up taking out a Mexican loan, you’ll have to pay that loan back in pesos, which means ongoing exchange fees to make those payments.”
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