How to get a mortgage in Alberta (when you’re relocating from out of province)
On the back of the incredible strength of the Real Estate markets in Ontario and British Columbia, we’ve seen an increasing number of out-of-province clients looking at the prairies as their next investment opportunity.
We wanted to create a blog post to help our out-of-province clients learn how they can purchase a home in Alberta in 2022. There are a couple of ways to purchase a home in Alberta when you are relocating from out of the province. We will break each of them down in detail below:
1. Purchase your home in Alberta as an Investment Property
If you and your family have strong income in your current province you may want to consider purchasing a rental property in Alberta. To purchase a rental property, you need to have 20% of the purchase price in down payment funds. In this case, we can use your current income and a letter from one of our appraisers in Alberta indicating what the property would rent for to help you qualify for the loan. This way, if you decide you want to move to Alberta in the future, you will have already invested in the market and laid some roots in your new home!
Many clients worry that if they decided to change the status of their rental property to a principal residence, they could have trouble with the lender. It is important to remember that our lives change all the time. Lenders expect and understand that the primary use of properties may change over the life of the mortgage. As long as you’re making your mortgage payments and maintaining a strong credit rating, the lender will not be worried about who is living in the home.
Pro Tip:
Did you know that your down payment for your investment property purchase can be gifted? It sure can! We have lenders that will accept 100% of the down payment as gifted funds from immediate family.
You can purchase a rental property with both a Triple-A mortgage and an Alternative mortgage. If you want to get your foot into the Alberta Real Estate market, but your income doesn’t quite lend itself to purchasing what you might like, we have lenders that are willing to stretch your debt servicing ratios and make the deal work for you. Estimated rates on these deals, (at the time of writing) are about 3.50%. The downside is a 1% set up fee (meaning if you borrow $200k you need to pay $2,000 in set up fees), but the upside is that this gives you an opportunity to enter a market with much upward pressure. If the property makes 4% this year, you will be more than compensated for the 1% lender fee.
2. Purchase your home in Alberta with Employment transfer or remote work
If you have the unique opportunity to transfer your employment to Alberta or work remotely (forevermore), you are in a wonderful position to take advantage of the opportunities in Alberta Real Estate.
Clients that are able to move their employment to Alberta simply need to provide the lender with a Letter of Employment that states they will either be able to work remotely from AB or that their position has been transferred to the province. In this case, we can use 100% of the employment income on the file to qualify these clients for a home purchase.
In many cases, it works best for the clients to secure a property in Calgary with a possession date, (meaning the date that you get the keys to your new house), about 60 days into the future. After securing the property in Calgary, it makes sense to list your home for sale in the province that you’re moving from.
Sometimes, the sale of the home in the other province might not close until after the possession date for the home in Calgary. In this case, we have many bridge financing options available to help simplify the transaction.
Pro Tip:
When you’re purchasing a home as a principal residence, you’re able to proceed with as little as 5% down payment. Many of our clients that are selling their properties in Ontario and BC have over $100,000 to use towards down payment funds on a new home. Savvy clients are purchasing not one home, but two! For their principal residence, they are using the opportunity to put 5% down and buying a $500,000 home. Then, they are using the remaining money (approximately $75k) as down payment funds on the purchase of a rental property. What an opportunity!
3. Purchase your home in Alberta with NO employment at all!
Clients that have the unique opportunity to have a down payment that is 35% or more of the purchase price of their new home can actually qualify for a mortgage without proving any income. In many cases after clients have sold everything in Ontario or BC, they have a significant amount of equity to work with for their home purchase in Alberta. For example, if you have $350,000 after the sale of your home, you could purchase a new home priced at $700,000 with as little as $245,000 down payment and keep over $100,000 in your bank account. You can do this without showing any traditional income if you are willing to work with our alternative lending partners.
Protip:
Many clients worry about using “alternative lending” as solution for their mortgage needs. Alternative lending should be viewed as a stepping stone towards your end goals. Many clients moving to Alberta from out of province use alternative lending for 6 months to 2 years until they have established their new career in Alberta.
Wrapping it all up:
Moving from one province to another is no small task. Purchasing a home for yourself, for your family or, as a rental property takes some planning and strategy. Our team at Spire Mortgages has helped over 100 out-of-province clients position themselves for a positive transition to Alberta in the last 3 months. If you’re considering making a move, please reach out to our team so that we can look to position your mortgage file to take advantage of the incredible opportunities in Alberta Real Estate.
