Banks tighten income verification for foreign mortgage applicants

September 27th, 2016  |  Home

Buying Canadian real estate just got a little harder for non-residents who want mortgages from Scotiabank and Bank of Montreal (BMO).

Both banks have sealed loopholes that would allow foreign real estate speculators to get mortgages without sharing income information with the bank. According to The Globe and Mail policies allowing buyers with large down payments to circumvent income verification will no longer be able to do so.

Previously at Scotiabank buyers with down payments of 50% wouldn’t need proof of income while at BMO applicants with downpayments of 35% or more could qualify for $2 million mortgages. In June that number has been cut in half with a $1 million cap. In April, it also stopped lending foreign students mortgages.

The previous policies were in place to help attract foreign real estate investment, however in recent days there have been lots of complaints by residents that foreign buyers are driving overvaluation in the country’s biggest housing markets by buying up properties, keeping them empty, and then selling them for huge profits as the last few years have seen consistent high-percentage growth for housing prices.

This concern has been seen mostly in Vancouver and to a lesser extent, Toronto. After researching the amount and impact of foreign investment in Lower Mainland BC, the government decided to implement a new tax for foreign buyers that drastically slowed the pace of Vancouver real estate activity shortly after it went into effect.