Tag: life in canada

5 Great Ways to Invest as a Permanent Resident of Canada

Alan Tenenbaum Author: Alan Tenenbaum Date: 2024/10/08

investments for permanent residents of canada

Start your finances off on the right foot after becoming a permanent resident of Canada

Canada has dozens of avenues for building wealth through investments, but not all of them are ideal if you aren’t yet a Canadian citizen. Regardless of your country of origin, your profession, or your location in Canada, new permanent residents should keep their personal finances top of mind.

Some of the most important aspects of personal finance in Canada include

Building credit and maintaining a good credit score
Saving for retirement
Buying a home
Paying for education
Investing to build wealth

How does a newcomer build credit in Canada?

Your credit report is automatically created as soon as you take out a loan or apply for credit. Your credit rating develops over time based on how you manage your credit.

Positively affect your credit rating by paying your credit cards, rent, mortgage, and hydro bills on time. Occurrences such as paying bills late, requesting multiple loans or credit cards, and exceeding your credit limit will negatively impact your credit score.

A clean credit report is important for obtaining financing, renting an apartment, buying a home, purchasing insurance, or receiving an advantageous interest rate.

A great way to build credit as a newcomer with no prior credit history in Canada is to apply for a secured credit card. The credit card is secured by a cash deposit, so if the cardholder doesn’t pay their bill, the bank simply takes the money from the deposit. Applicants with new credit or no credit history in Canada are seen as a risk, which is why banks may only grant a secured credit card. Read more about secured credit cards here.

What investment options are available in Canada for new permanent residents who want to save?

Here are some investment options for newcomers:

Registered Retirement Savings Plan (RRSP)
Tax-Free Savings Account (TFSA)
Registered Education Savings Plan (RESP)
First Home Savings Account (FHSA)
High Interest Savings Account (HISA)
Guaranteed Interest Fund (GIF)
And many more

A financial advisor can help you choose the best investment options based on your risk tolerance and financial goals.

Not all savings options are the right match for everyone. For example, if you are American, then a Tax Free Savings Account may not be the right fit as it can sometimes be treated unfavourably by the IRS when it comes to taxes. A quality financial advisor will take all aspects of your life circumstances into consideration when making investment recommendations.

When can a permanent resident contribute to a Registered Retirement Savings Plan (RRSP)?

Regardless of the date when you were granted permanent residence, you can start contributing to an RRSP as long as you earn an income in Canada and have filed at least one income tax return with the Canadian government. Foreign workers and students can also start saving before becoming permanent residents.

Is it possible to withdraw funds from a Registered Retirement Savings Plan (RRSP) before returning abroad?

If the assets in your RRSP are invested in a non-locked-in plan, it is possible to withdraw them at any time. However, the amount withdrawn will be added to your taxable income for the year, and you will be taxed according to your tax bracket. Consider the tax implications of withdrawing from your RRSP.

How can newcomers plan their retirement in Canada?

Retirement planning involves many factors. Seek professional advice from a financial security advisor who can help determine your retirement goals and how much you need to save to reach them based on your income.

How can newcomers save to buy a home?

There are many tax-free plans and accounts to help you buy a home in Canada, such as:

First Home Savings Account (FHSA)
Home Buyers’ Plan (HBP) through your RRSP
Tax-Free Savings Account (TFSA)

It is also important to protect your mortgage with mortgage life insurance so that if something were to happen to the primary breadwinner in the family, the mortgage will continue to be paid and your family members can continue living in their home.

Disability insurance and benefits are also available to permanent residents of Canada who have become sick or gotten hurt and are unable to work.

If you’d like to learn more about the best option for insurance as a permanent resident in Canada, contact Alan Tenenbaum directly at [email protected] or 416-930-4511.

Tags: credit, investing, life in canada

7 Important FAQs on Life Insurance for Permanent Residents

Alan Tenenbaum Author: Alan Tenenbaum Date: 2024/10/01

The importance of life insurance for Canadian permanent residents

Moving to Canada is a huge change, which makes it more important than ever to ensure that your family is protected financially.

Why should permanent residents of Canada purchase life insurance and what does it cover?

In the event of death, life insurance covers the deceased’s financial commitments, including mortgage and debts. It also provides relatives with the money they need to maintain their lifestyle and covers death-related expenses, such as the cost of repatriating the deceased to their country of origin. This money is tax-free.

How should a permanent resident choose the best life insurance?

The best way to choose a life insurance product that fits your specific needs and financial situation is to consult a qualified, experienced advisor. While it’s easy to go online and get lots of quotes, the coverage offered may not be appropriate for your family’s needs.

For example, the insurance policy may not cover

repatriation of remains to country of origin
financial support for aging parents
higher education costs for children
financial support for a spouse or common-law partner

Before purchasing an insurance policy, it’s always best to speak with an insurance advisor who is experienced with applicants in similar circumstances who will take all aspects of your life into account.

What is the approximate cost of life insurance in Canada?

The cost of life insurance varies according to your needs. Here are a few examples of term life insurance costs:

$9/month for coverage of $100,000 on a 10-year term: 26-year-old female, non-smoker
$47/month for coverage of $750,000 on a 20-year term: 35-year-old male, non-smoker
$62/month for coverage of $350,000 on a 15-year term: 50-year-old female, non-smoker

Are non-Canadian citizens eligible for life insurance in Canada?

Yes, it is possible for both permanent residents and temporary residents to purchase life insurance. This would be the case for a study permit holder, for example. You can contact an advisor for more details.

What types of life insurance are available in Canada?

There are many types of life insurance to choose from, each with its own distinct characteristics. Examples include:

Term life insurance
Permanent life insurance
Participating life insurance
Universal life insurance

Are my immigration documents required to purchase life insurance?

No. Immigration documents are not generally required to purchase life insurance.

What other types of insurance are available to permanent residents and newcomers?

Different types of insurance products include:

Critical Illness Insurance : Provides tax-free financial aid if you are diagnosed with a critical illness covered under your policy.
Disability and Income Insurance : Provides a source of income during disability leave to meet financial commitments and concentrate on recovery.
Accident Insurance : Provides a lump-sum payment or covers certain accident-related expenses if you suffer an accident.
Home Insurance: Protects against damage to your home due to fire, flood, theft, water ingress, etc., whether you are a tenant or owner.
Auto Insurance: Required by law, it protects your vehicle and wealth, and provides access to emergency assistance.

Please note that public and group insurance plans offered by employers do not always provide complete coverage. It is important to complete your coverage with the help of an advisor.

If you’d like to learn more about the best option for insurance as a permanent resident in Canada, contact Alan Tenenbaum directly at [email protected] or 416-930-4511.

Tags: insurance, life in canada, newcomer, permanent residence

How to Successfully Get a Mortgage When You’re Self-employed

Kola Ifabumuyi Author: Kola Ifabumuyi Date: 2024/10/01

Key Considerations for Self-Employed First-Time Homebuyers in Canada:

Getting a mortgage to buy your first home as a self-employed person can be tricky, but it’s possible with the right collaboration with a mortgage planning expert. Here are three important things to know.

First, it’s important to understand that getting a mortgage can be harder for self-employed people. Lenders need to see at least two years of tax returns and other financial papers to check if your income is stable. To make your application stronger, try to reduce your debt, save more money, and keep your tax filings accurate and up-to-date. Lenders want to see that your income is steady and reliable.
Next, having a good financial profile is key. Keep your credit score high by paying bills on time and using credit wisely. Manage your business and personal finances separately and keep good records. This makes it easier to show lenders a clear picture of your financial health. You can also use your assets, like investments or other properties, to help support your mortgage application.
Finally, a mortgage broker can be very helpful. They know which lenders work best with self-employed people and can help you access special mortgage deals. They also guide you through the paperwork and make sure your application is as strong as possible.

By focusing on these areas, self-employed people can improve their chances of getting a mortgage. Many self-employed individuals get mortgages every year, and with the right preparation and help, you can too.

What documents are required to apply for a mortgage when you are self-employed?

This is an important question for anyone who is self-employed and considering buying a home in Canada. It’s an even more important question for newcomers to Canada. Will Canadian mortgage lenders accept tax documentation from their previous country of residence? Do they need to wait until they have 2 years of Canadian tax returns to apply for a mortgage?

ANSWER:

Canadian lenders typically prefer Canadian tax returns for self-employed mortgage applicants. However, some lenders may consider tax documentation from an applicant’s previous country of residence, especially for newcomers to Canada.

Three examples of countries whose tax documents Canadian lenders might consider are:

United States
United Kingdom
Australia

These countries have similar financial systems to Canada, making their tax documents more familiar to Canadian lenders. Generally, self-employed individuals need two years of Canadian tax returns for a smoother mortgage application process. This allows lenders to accurately assess the applicant’s income in the Canadian context. There are alternative lending options that do not require two years of Canadian tax returns, which are viable options a mortgage planner can utilize.

Every self-employed person’s situation is different. If you’re self-employed and plan to apply for a mortgage, it is recommended to speak with a licensed mortgage broker who is experienced with self-employed applicants.

How can newcomers to Canada build credit quickly?

Building credit is one of the first steps that newcomers to Canada can take in order to achieve financial success and meet their goals such as purchasing a home. Here are some easy ways that newcomers can begin to build a positive credit history in Canada:

Secure your start: Start with a secured credit card. You’ll need to provide the bank with a deposit of funds, but it’s easier to get a secured credit card than an unsecured credit card. Once you have the card, use it for small things that you already buy, such as a transit pass or groceries, and pay it off every month.
Climb the credit ladder: After 6–12 months of good use, you might get an unsecured card. This shows you’re a trustworthy borrower. If you are offered a pre-approved unsecured credit card, take it. You can also apply for an unsecured card.
Master the 30% rule: Keep what you owe under 30% of your credit limit. This is known as credit utilization. The less of your available credit that you are actually using, the better it reflects on you as a credit risk. This shows good credit management and helps your score. The reverse is also true – having maxed out credit cards is bad for your credit.
Quality over quantity: Don’t apply for lots of credit cards at once. Each application can lower your score. Instead, spread out applications and use your current credit wisely.

Is there a minimum account balance required to get a mortgage in Canada?

Secure your closing costs: In addition to your down payment, lenders usually want you to have 1–1.5% of the home’s price in cash. This helps you cover closing costs like legal fees and land transfer taxes. Having this extra money shows lenders you’re ready for homeownership beyond just the down payment.

How do I choose a mortgage broker?

Working together with the right mortgage broker is an essential part of the home-buying process in Canada. Brokers who lack experience with self-employed applicants may not give the best advice to home-buyers that work for themselves.

When choosing a mortgage broker as a self-employed person, here are a few things to keep in mind:

Has a track record of successful approvals for diverse mortgage scenarios
Provides clear, honest advice
Availability and responsiveness
Range of lender partnerships

What does a good mortgage broker do?

Whether a mortgage applicant is self-employed, employed as a T4 employee, or is retired, they will always have their clients’ best interests in mind. If you are new to Canada, having a broker with experience in this area is even more important. A quality mortgage broker will:

Assess your specific financial situation: review income, debts, and credit to determine mortgage eligibility.
Advocate for clients: negotiate with lenders on behalf of my clients, especially those with non-traditional income profiles (e.g., self-employed, commission, bonus)
Problem-solving: Customize creative solutions for challenging situations, such as variable annual income
Listen to the client: They will ensure you understand every part of the process, and listen to your questions and concerns.

How do you know if a mortgage broker is good vs. not that great?

Tailored solutions and education: A great mortgage planner learns about your financial situation and goals to give you the best mortgage options. They explain each choice in simple words and don’t just push the easiest or lowest-rated option. Instead, they find the best fit for you. A bad broker might give the same option to everyone or rush you without explaining.
Proactive communication and problem-solving: A great mortgage planner keeps you informed, spots problems early, and fixes them. They answer your questions quickly and stay in touch even after your mortgage is done. If problems come up, they use their skills to find solutions. A bad broker might be slow to respond, leave you confused, or give up easily.

If you are considering purchasing a home, especially if you are self-employed or a newcomer to Canada, Kola Ifabumuyi is happy to answer your questions at no cost. He can be reached by email at [email protected] and by phone at 416-709-7400.

Tags: buying a home, life in canada, Mortgage