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Canadian mortgage rules

People in Canada often take loans to buy a house. First, it is common practice. Secondly, there is not enough cash as usual. Most people in Canada purchase houses on a mortgage using mechanism of mortgage loan. The main advantage of mortgages in Canada is extremely low interest rates, only 2-5 percent per year. Both citizens and non-residents use bank services to get a mortgage. But in any case, mortgage implies that a person takes some costs from bank giving his real estate as a transaction guarantee.

There are several programs in this regard in Canada, including special program for those who buy homes for the first time that is called the First Time Home Buyer. There are tax benefits for this category. For those who buy real estate for the first time (first time buyer), it is possible to pay only 5 % of purchased property cost. However, there are a number of limitations. First, you must be an employee and have a stable income enough t for the bank to issue you a credit for 95 % of purchased property cost. You can also use the money from pension fund as a down payment according this program (you can use up to $ 20,000 of RRSP savings). There are also some benefits for those people who have an opportunity to make a significant initial financial contribution of 35 % of purchased property cost. You do not have to mess with documents that confirm the presence of a steady income.

There is a special lending program for immigrants who have been living live in Canada from one year up to three years. It provides significant down payment (30 % or more). You also need to prove your status in Canada (Permanent Resident Card). There is a mortgage program for entrepreneurs. You must provide financial documents for the previous 2 years to the bank (T1 General and Notice of Assessment) to join this program. In case of good credit history the applicant can get a mortgage of up to 95 % of current market property value.

Mortgage program for new house construction is designed for those who already owns the land site and wants to build new or rebuild an existing house. This mortgage loan is issued to the client by portions for house building. Usually house construction process includes three phases: foundation works, construction of walls under the roof, painting and decorating. The obligatory condition to get this loan is land site ownership. There is also mortgage program for summer house (vacation house) purchase. You can get up to 90% of real estate price. The maximum mortgage loan term is 25-35 years.

Hugo Newman for PrepareForCanada about Canadian mortgage rules.

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