Purchasing a home is an overwhelming process for even the savviest of homebuyers. Imagine buying one in a country where you're unfamiliar with the process and can't speak the language.
That's the situation many of the 1.1 million immigrants who came to Canada between 2001 and 2006 find themselves in today.
"New immigrants face several challenges when buying a home in Canada - most specifically, cultural barriers and common barriers to homebuyers," says Benoit Sanscartier, director of insurance policy and technological operations at CMHC. "They often have a limited knowledge of English and French, and they don't have a social network of family and friends to refer to when buying a home."
Sanscartier adds that simple components of the process - such as determining how much an individual can afford - can be overly complicated with a limited Canadian credit and employment history.
While new mortgage products have made the process easier, they still require the assistance of knowledgeable mortgage professionals. By 2017, Statistics Canada estimates one in five Canadians will be foreign born. But, while this niche is quickly expanding, few mortgage brokers/agents are taking advantage of the opportunity.
Diamonds in the rough
Marcus Tzaferis, Toronto-based vice president of the REA Group, says new immigrants make up 15% of his business - and he sees very little competition from other brokers.
"There's a huge opportunity for growth in the new immigrant market," he says. "I attended a lender tutorial the other day and the topic was 'emerging markets' - and no one mentioned new immigrants."
Perhaps the idea of language barriers, limited credit histories and exorbitant amounts of documentation is disconcerting to some brokers/agents. If this is the case, Nick Kyprianou, president of Home Trust, emphasizes today's 'new-to-Canada' business can often be well worth the effort.
"New immigrants coming to Canada today are different than those that came here in the 1950s and 60s," he says. "Back then, they were primarily applying for labour jobs and had little education. Today, they have an education and, usually, money."
Kyprianou says what they may lack in credit history they often make up for in cash. Many immigrants who apply for loans with Home Trust are entrepreneurs capable of putting down hefty down payments.
Joanne Thomas, a mortgage broker with CENTUM Capital Group Inc in Vancouver, says her typical client fits this description.
"My clients come from all over, but primarily the UK," she says. "They're typically people leaving a business and they have a fair amount of net worth. They want a mortgage because they don't want to bring all their money to Canada."
Most of Thomas' clients are referred to her by her husband, David, who is an immigration lawyer.
The two share an office and, once David helps them with their immigration matters, he mentions Joanne's name. Many clients find the one-stop-shop aspect convenient, while others opt to deal with banks such as HSBC that they have likely dealt with previously in their home country.
"I have to be careful about referring clients to Joanne - the Law Society has strict rules around referrals," he says. "But I always make sure that, by the time they reach her, they're my ex-clients. I always offer full disclosure - they know that she's my wife."
While the referral relationship brings Joanne plenty of high-quality clients, she admits the relationship is rather one-sided.
"Most people who are thinking about buying a home have typically dealt with the immigration issue, so I don't usually refer clients back to David," she says with a laugh. "The relationship is mostly to my benefit."
Joanne has also developed relationships through realtors in the area that deal with new immigrants. David used to attend trade shows in the UK and, while promoting his own services, he'd hand out Joanne's business cards and pamphlets.
Troy Alexander, a mortgage consultant and branch manager with VERICO Select Mortgage Corp in Victoria, says when he used to offer new immigrant mortgages he typically received referrals from various bank associates.
"I knew a gentleman at Scotiabank that was Iranian and dealt a lot within that community," he says, adding that he also received a lot of clients from the East Indian community through a similar connection.
The clients he received from these relationships were typically self-employed, although they did have significant down payments most of the time. Because of this, Alexander often took advantage of BMO Bank of Montreal's no-income qualifying product that offered a 65% LTV.
When BMO pulled out of the broker channel in early 2007, however, it took its new immigrant product with it. Since then, Alexander's business has pretty much dried up.
"Little income combined with a non-existent Canadian credit history makes it difficult to obtain a mortgage," he says. "Affordability is a factor for new immigrants, especially in Victoria and Vancouver. You have to make a certain level of income."
While Alexander acknowledges that mortgage insurers have opened new doors with their 95% LTV offerings, he says buying a home continues to be a difficult battle for self-employed new immigrants.
Todd Poberznick, Bridgewater Bank's vice president of production, says this is largely a result of the inherent risks involved in dealing with new immigrants.
"The primary question when dealing with someone from another country is, 'Where is your money coming from?'" he says, adding that Bridgewater deals solely in the insured realm. "With no credit history and no Canadian bank to call up, the money could be coming from terrorism or money laundering - it's hard to know."
Poberznick adds that, while a lender may offer an insurer's products, at the end of the day, the company will only lend where it sees fit - which might not be in line with the insurer.
"The fact that an insurer might offer 100% LTV doesn't mean we will. In the same sense, just because an insurer will insure in a certain small town doesn't mean we will, because we're not comfortable with that risk," he says, adding that Bridgewater currently lends to 97% LTV for new immigrants. "At the end of the day, if there's a default on a loan, we're the ones that will be in trouble."
Kyprianou of Home Trust, which offers both insured new immigrant loans through CMHC and AIG, as well as uninsured loans up to 80% LTV, says the new immigrant market often carries less risk than the average observer would expect.
"Risk is a perceived thing - it's not always actual," he says. "New immigrants typically put a lot of value into their home. It's a team effort - their family is often involved - and, as a result, they don't usually go into arrears."
Kyprianou says Home Trust takes a common-sense approach when lending to new immigrants. If the client is purchasing a good property in a good area and has at least a 20% down payment, Home Trust isn't concerned if they can't fully prove their income.
"We'll take a formal written statement - it's pretty much no-income qualifying," he says.
Thomas of CENTUM Capital Group says, since BMO left the marketplace, her favourite product is Scotiabank's Welcome to Canada mortgage because it's the most flexible.
"Other lenders require three months' income. A lot of my clients don't have a job lined up yet or are still working for their old company remotely," she says. "It's silly for them to give up what they have to get a job here just to qualify for a mortgage."
Thomas likes Scotiabank's product because uninsured clients don't have to show a Beacon score and the bank will consider an international credit history.
Communicating with newcomers
Mortgage brokers/agents don't have to be part of an ethnic community to obtain new-to-Canada business. According to Tzaferis of REA Group, it often helps if you're not.
While Tzaferis' background is Greek, he says he's only had one Greek client since he's been working with new immigrants. The majority of his business comes from Russians, Sri Lankans, and Kurds from Iraq and Iran.
"Sometimes it helps if you're not from their community," he says. "Some cultures don't like dealing with people in their communities because they want to hide the fact that they have money."
In the same token, Tzaferis has a number of agents in his office who speak a variety of languages - such as Pakistani and Indian. He says this secret weapon has come in handy numerous times when dealing with new Canadian clients. Because language barriers are often a problem, Tzaferis also frequently asks clients to sign an authorization form that allows him to obtain the required documentation from such sources as landlords and bank representatives.
The Thomases say they have seen a lot of success by marketing themselves as a team to hot-button areas such as Whistler, British Columbia. Whistler has recently become a hot spot for Australian and New Zealand immigrants - who make up almost 35% of the city's immigrant population - and, with the upcoming Olympics, there are likely other out-of-towners looking to purchase property. It also helps that they are marketing their services together - through transit ads and print ads in high-end magazines such as Vancouver Lifestyles.
Sanscartier of CMHC says targeting ethnic newspapers can also be a great way to introduce yourself to specific ethnic communities. The insurer has seen a lot of success in issuing homeownership fact sheets to various papers.
The sheets have been translated into seven different languages and the short, digestible information is a hit with editors. They often print the article as-is, complete with CMHC's website address and toll-free information line.
"We've seen a tremendous response from print media. New immigrants need this information. It helps us communicate with these potential homebuyers and, because they already have the information before setting foot in a broker's office, it helps brokers as well," Sanscartier says.
Clients typically must:
- Have lived in Canada for three years
- Have a down payment from their own resources
- Have a valid work permit or landed immigrant status
- Have a minimum of three months of full-time employment in Canada
- Have no mortgage delinquencies, previous bankruptcies or foreclosures
- Ensure all debts held outside of Canada are included in qualification ratios
- Not include foreign rental income in qualification ratios
The exception seems to be CMHC. The company doesn't brand its product as a new-to-Canada product because, as Sanscartier says, it doesn't want to single any group out.
"The product we offer is available to any Canadian that doesn't have an established credit rating," he says. "There's a misconception that new immigrants have to obtain a special mortgage with more stringent rules because they don't have a Canadian credit history.
As a result, CMHC's insurance product does not require new residents to have lived in Canada for a minimum amount of time. The insurer will also consider alternative sources of payment history if a Canadian credit history or foreign credit bureau is not available.