Foreign buyers just got one of the most aggressive hurdles when buying Canadian real estate. The Canadian Imperial Bank of Commerce (CIBC) quietly notified its mortgage advisors the “Foreign Income Program” has ended. The program was replaced on February 1, 2018, with a new program designed to ensure compliance with B-20 guidelines from OSFI. This change will have a drastic impact on those that use foreign income to qualify for a mortgage, from one of Canada’s largest banks.
The old system at CIBC was amazingly easy for foreign buyers and international students to get a mortgage. If you had a deposit above 35%, it was good enough to get an uninsured mortgage, without your income being verified in many cases. For the bank to be at risk of a loss, the buyer would have to immediately stop paying their bills, and prices would have to decline by 35%. A highly unlikely scenario, in my opinion. This process wasn’t a secret, some branches even had signs advertising it.
The new income verification system is much more strict, to comply with B-20 guidelines. The internal document sent to mortgage advisors, walks them through the new system. The new requirements outlined include obtaining:
The client’s T1 General, complete with foreign income stated (line 104).
. CRA Form T1135, a.k.a. a Foreign Income Verification Statement, showing assets.
. Companies using income will require a CRA Form T1134, Information Return Relating To Controlled and Non-Controlled Foreign Affiliates.
. A Canadian credit bureau report, and a foreign credit bureau report to confirm any foreign liabilities.
From the document, it appears the mortgages will be limited to the amount of overseas income and assets declared to the CRA. That doesn’t sound like a huge deal, but it is for cities like Toronto and Vancouver. Increasingly, people moving into neighbourhoods with the most expensive homes, are declaring poverty levels of income. Some observers have speculated the only way this works, is if overseas income is not being declared locally. You know, because low income families usually can’t even afford property taxes on a mansion.