Immigrants to Canada who are seeking to buy real estate must ensure that they know the country’s financial systems, or they could find themselves losing thousands of dollars in needless penalties.
That’s precisely what happened to two newcomers who were forced to pay a $15,000 penalty for not meeting payment deadlines in an Alberta house deal.
Divyang Patel, a mortgage agent from Affinity Mortgage Solutions, says newcomers must become familiar with Canadian real estate processes before they bid on a home.
His advice comes after Rakshith Purushothama and his friend, Arfeen Ahmed invested in a home in Calgary, because homes in the GTA are so expensive. The friends migrated to Canada from India about 10 years ago.
The average home in the GTA cost just above $1.08 million in December 2023, while prices in Calgary averaged around $540,000, according to Patel.
In August 2022, Purushothama and Ahmed decided to partner with a friend to pool their resources and buy a house in Calgary valued at $410,000 at the time. They paid 10 percent of the cost up front, and were required to pay the builder another 10 per cent and provide their approved mortgage documents before closing on Jan. 8, 2024. By this time, the friend had backed out of the deal.
Purushothama and Ahmed began gathering the paperwork for their mortgage agreement in the first week of December. They allege, however, that the company they approached was slow when it came to issues such as credit checks, tax filings, and employment status. The Christmas break compounded their woes, and with the mortgage firm allegedly not answering their reports for updates, they began feeling the heat in the first week of Jan. 2024.
Through their lawyer, they then approached the company building their home for an extension to file their mortgage papers. The builder’s response, however, shocked them: the friends would need to cough up another $15,000 for missing their payment deadlines and requesting an extension. Failure to adhere to the deadline would also lead to the housing agreement being cancelled. Scared of the consequences, the friends chose to fork over the additional money.
When approached, the mortgage lender declined to comment. NCM also approached the builders for their take on the situation. Although declining to speak about this case in particular, the company did provide a statement regarding their expectations from clients.
“While we do our best to accommodate issues that might arise, last minute requests for closing date extensions or, alternatively, customer’s simply failing to “close” on purchases give rise to significant costs for our organization (both in terms of time and resources),” they said. “We evaluate these scenarios on a case-by-case basis as they arise, always mindful that there are material costs to our business when our customer’s fail to meet their contractual obligations.”
Forced to dip into their savings and open lines of credit to come up with the extra cash, the ordeal has affected Purushothama and Ahmed mentally and financially.
“We were ready with the money and then, very, very close to closing, we had to come up with almost another five percent, or $15,000,” they said. “That was a pain, because no one was listening to us. We literally had to come up with more than $55,000, and they gave us one day to fulfil it. It was told to us on the third or fourth of January, and we had to give it to them by the fifth, so that they could receive it by the eighth.”
“We had to fly out to Calgary, because if we had sent the money transfer by post, it would have reached them on the 12th, and they could cancel the agreement. It was like they had a gun to our head,” said Rakshith, who lives in Bowmanville, Ont.
Patel said obtaining a mortgage in Canada can be complex, especially for newcomers.
“Newcomers to Canada often face a steep learning curve when it comes to understanding the country’s financial systems and mortgage processes,”Patel says.
“Many arrive with diverse backgrounds and experiences with financial institutions and regulations from their home countries. While some may possess a strong understanding of personal finance and mortgages, others may find themselves navigating unfamiliar terminology, regulations, and banking practices.”
He added, however, that newcomers often have a willingness to learn, educating themselves through financial literacy programs, workshops, and online resources.
“On the other hand, long-time residents of Canada may have accumulated years of experience navigating the country’s financial landscape. They are likely more familiar with the intricacies of Canadian banking, credit systems, and mortgage options. Over time, they may have built relationships with financial advisors or mortgage brokers, giving them access to valuable insights and advice.”
Patel also advises long-term residents to not be complacent, as they could potentially overlook new requirements in the mortgage market.
“We went through trauma for the last few days of that last closing, and the effects are still being felt,” said Purushothama. “It is not easy, but I will come out of it. I definitely had some support from my wife, but she also went through the trauma indirectly because I used to tell her about the proceedings. We had to pull out all the stops to get this agreement over the line.”
Ahmed, who is in Mississauga, Ont., added: “My kids used to ask me ‘daddy, what happened? You were so excited this morning, why are you feeling so down?’, and I told them that I was not feeling well. You can’t tell all these things to your kids, right?”
The friends’ real estate lawyer has been guiding them throughout the process, and has advised them to try to recover their money in small claims court. An email thread shared with NCM by Purushothama reveals their lawyer attempting to negotiate with the builder on her clients’ behalf, but to no avail. NCM did approach her for comment, but at the time of writing, she said she is awaiting clearance from her clients before she can do so.
While he empathized with the friends, mortgage lender Patel said the onus of completing all obligations on time was the responsibility of the buyer.
“You have to be able to pay the money on time, because the agreement was that when you pay the second instalment, you have to show the mortgage agreement that is going to kick in afterwards.
“They say that the bank took very long to assess the credit score, employment history, and tax forms. I know it is frustrating, but the thing is that you have to be well-prepared in advance. These gentlemen say they began in the first week of December, but in December, they only had two weeks, because from the second week, people start going on vacation. They should have started the process from Nov. 15.”
“The builder is responsible for giving a 60 day notice if they are going to delay the closing, but when you know that you now have 59 days left and you haven’t received any notice, that means you are going to be closing the deal, and you need to start the process from that day.”
Gautam is a journalist, editor and content writer skilled in both digital and print media, who brings with him more than a decade of editorial experience across five countries, including Canada and the US. A member of the Canadian Association of Journalists, Gautam worked as Deputy Editor of the Times of Oman before moving to Canada, where he continues to write on healthcare, education, human interest stories, sport, lifestyle, and science and tech. Gautam has a Masters' Degree in journalism from the UK, and is fluent in both English and French. He lives in Toronto.
Shilpashree Jagannathan is a journalist from India. She now lives in Toronto and has worked as a business reporter for leading newspapers in India. She has tracked telecom, infrastructure, and real estate news developments and has produced podcast series. She currently focuses on human rights, feminist movements, and other related issues in Canada and India. Her weekends are spent bird watching in one of the Toronto birding hotspots; she loves trails, biking, and a lot of sun.
