Employee Relocation: Financing a Move Within Canada

A relocation compresses a mortgage into a timeline someone else set.

A relocation compresses a mortgage into a timeline that was set by someone else, and the problems it creates are almost all timing problems rather than credit problems.

What makes a relocation file different

Two properties for a period. Unless the sale and the purchase close on the same day, you either carry both or you have sold and not yet bought. Both situations need planning, and only one of them is expensive.

A new employer. Probation, a changed compensation structure, or a move from salary to salary-plus-bonus all change how an underwriter reads your income, even when you are earning more than before.

A relocation package. Employer contributions toward moving costs, a guaranteed home sale, or a temporary living allowance each affect the file, and some are treated as income while others are not.

A market you do not know. Values, property types and closing customs differ across the country, and an offer written on assumptions from your current city is a common source of trouble.

Getting the timing right

Bridge financing covers the gap when your purchase closes before your sale. It is short term, secured against the sold property, and it needs a firm sale agreement to exist. Arrange it at the same time as the purchase, not once the dates are set.

Selling first removes the bridge and the carrying risk, at the cost of possibly renting in between and buying under time pressure.

Porting your existing mortgage carries your current rate and terms to the new property, which matters a great deal if your rate is below today's market. Not every mortgage is portable, the timelines are strict, and you generally have to requalify. Check the portability clause before you list.

The employment question

Most lenders want to see that the new role is permanent and that any probation is either completed or waived. A signed employment letter setting out position, start date, compensation and probation terms is usually the document that decides the file.

If you are moving within the same employer, say so clearly. Continuous service with one employer reads very differently from a new job.

What to have ready

Employment letter for the new role and recent pay statements from the current one. Two years of T1s and notices of assessment. The relocation policy or package letter, if there is one. The sale agreement for your current property once it exists, and your current mortgage statement including the portability and prepayment terms.

When to start

Before you list, not after. Portability, bridge eligibility and how the new income will be read are all answerable in one conversation, and all three are far cheaper to plan than to discover. ---

David H. Nataf is a mortgage broker licensed in Quebec by the Autorité des marchés financiers (AMF #3001986744), practising through Groupe Hypothécaire Orbis. He also holds an individual U.S. licence, NMLS #2613311 (Florida), for cross-border files.

This page is for information. Lender programs, rates, requirements and availability vary and can change without notice. Nothing here is tax, legal or accounting advice.

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