— In Canada, when a homebuyer qualifies for a mortgage, it is considered proof of a person’s income.
But if a mortgage loan is offered to someone without proof of residence, the lender will not issue the loan.
That is because the federal government doesn’t require a home buyer to have a valid Canadian passport, the same requirement as Canadian citizens.
Instead, it requires proof of at least one permanent residency certificate issued by a province or territory.
So, the question is, is the mortgage loan offered to an unqualified Canadian citizen valid?
That is what a new report from the Bank of Montreal and the Canadian Mortgage and Housing Corporation (CMHC) looks into.
The report says that when mortgage lenders offer a loan to a person who doesn’t meet the residency requirement, they risk losing the loan and possibly the customer.
The CMHC says the risk is increased when a borrower is under 30 years old, or is under age 25 when they apply.
“We think that there are many more borrowers who will be exposed to the risk of being turned away from a mortgage due to residency,” says Michael O’Brien, vice-president of mortgage and loan programs at the CMHC.
He says there are several ways that a borrower could be turned away if they don’t have a residency certificate.
A homeowner could fail to file a tax return, or have a non-resident parent or guardian file the tax return.
The loan could be denied if a loan has not been approved.
The borrower could also fail to pay a debt due, or a defaulted loan could result in foreclosure.
The risks are much greater for people with disabilities, as those with financial hardship are less likely to be eligible for a loan, O’Briensays.
“For example, a person with a disability is less likely than someone who is not to have one, so if they do have a disability, then we would be more concerned about a borrower that has a disability,” he says.
If a person has to pay for a disability-related expense, such as a wheelchair or hearing aid, or if they lose their job due to a disability or need to have the loan repaid, they may have to pay more for a second loan, which could lead to further financial hardship.
For those borrowers who can pay, a monthly payment of up to $2,500 is recommended, according to CMHC data.
In Ontario, the riskiest part of the problem is when a loan is issued to someone who has no documents, or documents that don’t meet residency requirements.CMHC says it is trying to identify the types of documents that may lead to a loan being denied, but says it can’t make any blanket recommendations about how to address this problem.