The new guidelines of the banks of Canada now favor foreign migrants, because they do not need to prove the source of their income, and still qualify for the uninsured mortgage loans from Canadian banks.
Now, foreign clients who have no credit history can go for an uninsured mortgage in Canadian banks.
The Globe and Mail has reviewed the Bank of Montreal and Scotiabank internal documents which showed the rule for foreign migrants is exceptional from the regular rules which mean rules are not the same for the foreign and Canadian clients. For the foreign clients who make the down payment of 50% of the property value, the bank officials do not need to verify the sources of income of foreign clients.
Now, at BMO, these new immigrants who are settled in Canada for less than 5 years need to pay only 35% of down payment for property value up to $2 million. There is also no need to verify the income sources if they put 35% of down payment, though they have settled for less than 5 years, as per guidelines of Scotiabank and BMO.
How favorable are the new rules for migrants?
These new rules favor foreign migrants, especially who are new to the country, as they make it less arduous for them to obtain loans, and build a good credit score. But while these rules favor foreigners, the Canadians feel it is unfair. This is because it encourages and unintentionally helps the immigrants to access the real estate sector with ease. Also, the new foreign clients can get easier access to the credit, say the critics.
While the banks were reprimanded for low foreign income, these rules that favor foreign migrants can bring in more revenue to the banks and the country. But there are few things of concern.
No Verification Needed
The newcomers to Canada can easily borrow the money for down payment to stay in their account for a while, and there is no verification to ensure that they would pay the charges for the years to come. There is also the chance of the banks being vulnerable to money legalizing as there is no verification to ensure the money is legitimate.
Furthermore, when the other big banks like TD Canada Trust, CIBC, RBC, and HSBC were surveyed by The Globe they also showed no specific conditions for the verification of income of foreign clients.
BMO states that it assesses each individual carefully, and there are multiple factors involved in verification, and Scotiabank has meticulousness involved in other areas to compensate these new rules that favor migrants. But, still, the criticism that it is unfair for the locals, and it would raise the value of the property intensely hangs on the minds of the critics and the locals of Canada.