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Buying a home in Canada: Everything you need to succeed

16 July 2018

There’s nothing better than to have a home to call your own. Home is where you make a life for yourself with the people you love. It’s where you create wonderful and unforgettable memories together. It is also the best place to start building the foundations of your bright future.

All these things make buying a home one of the biggest and most exciting steps you will ever take. It’s undeniably a huge investment, financially and even emotionally.

For first-time buyers, purchasing a new home may seem intimidating at first because you may not where to even begin. However, if you gain enough knowledge about the home-buying process, you’ll surely feel more empowered by your ability to find quality and affordable homes.

You’ll also have more confidence in choosing the right home for yourself and in your ability to negotiate the best deal for it.

Am I ready to be a homeowner?

Purchasing a new home is one of the most significant life decisions you will ever have to make. If you feel like you’re now prepared to say goodbye to a life of renting, you must first ask yourself the following questions before you start house-hunting:

  • Are you financially stable?
  • Are you financially disciplined enough to fulfill all the duties and cover all the costs that come with being a homeowner?
  • Do you know and understand all there is to know about home-buying and homeownership?


What are the costs of homeownership?

If you’re a first-time buyer, it is important to know from the very start to be aware of all the costs attached to homeownership. There is so much more in paying for a home than just saving up for the down payment and paying the mortgage. You don’t want to be surprised by a major expenditure that you didn’t get to save up for.

Here are some of the costs of homeownership that you should know:

  • Upfront costs: What you initially pay for purchasing a home.
    Includes: Down payment, closing costs, and applicable taxes
  • Ongoing costs: What you will be spending while living in your home.
    Includes: Mortgage payments, property taxes, insurance, utility bills, minor repairs etc.
  • Major repairs: Repairs and renovations are inevitable when you own the place where you live. Includes: Foundation repair, roof replacement, etc.


Can I afford to buy a new home?

Before you start house-hunting, you must first know for certain just how much you can afford to spend on your new home. While your mortgage payment and your down payment may be among your biggest expenses, there are many other costs associated with purchasing a home that every homebuyer needs to consider.

At this point in the home-buying process, you should gain a full understanding of your current financial standing. Before you consult with a broker, it’s best that you make all the necessary calculations to determine how much you can afford.

What’s my credit score?

Your credit score reveals, in a nutshell, your financial condition at a particular point in time. It is incredibly valuable because it is a testament to how responsible you are in paying your bills and debts.

Mortgage lenders and brokers will evaluate your credit history in deciding whether you should be approved for a mortgage. This include the interest rate they will charge you.

A low credit score may disqualify you from getting a loan or may make financing even more expensive.

Get a copy of your credit report early to know the current state of your financial health. Take this opportunity to make the necessary corrections if there are any mistakes and address your delinquent accounts, if any.

How much are you spending on a monthly basis?

To know how much you can afford in buying a new home, you need to know how much money you are currently spending. Make a comprehensive list of your monthly expenses and subtract the total amount of money your household earns every month after taxes and deductions (your total monthly net income). Whatever is left, is the amount of money you have after all your expenses.

Your monthly expenses may include the following:

  • Household expenses: housing maintenance, tuition, child care, clothing, groceries, etc.
  • Loans and debts: credit cards, car loans, personal loans, student loans, mortgages for properties already owned, other lines of credit
  • Entertainment expenses: travel, events, dining out, hobbies, reading materials, etc.
  • Savings and donations


What are the upfront costs associated with buying a home?

Aside from calculating the amount you can afford to purchase a house, you must save up enough money to pay for the following upfront costs as well:

  • Down payment: a partial and initial payment of the home’s purchase price
  • Home inspection and appraisal fees
  • Insurance costs (e.g., property insurance, mortgage loan insurance, etc.)
  • Land registration fee: the amount is typically a percentage of the home’s purchase price
  • Prepaid property taxes and utility bills:  Bills paid in advance by the seller must be reimbursed by the homebuyer
  • Potential repairs or renovations
  • Moving costs
  • Legal or notary fees
  • Other taxes: Goods and services tax (GST), harmonized sales tax (HST) and Quebec sales tax (QST) on newly built homes or mortgage loan insurance


The verdict

If you did the math and it tells you that you are ready to buy a home, then you may finally seek out a mortgage broker to explore your financing options.

Perhaps things are a little tight? Here are some of the things you can do to turn things around:

  • Improve your credit score by consulting with your lender or a credit counsellor
  • Re-evaluate your current budget and figure out which expenses you can trim down.
  • Pay off some of your outstanding loans and debts
  • Wait a few more years and save enough money for an even larger down payment
  • Set your sights on a more affordable home


How do I find the right home?

Once you have a firm grasp of your financial situation and have thoroughly explored your mortgage options, it’s time to start house-hunting.

Home search options

Once you start actively searching for a new home, don’t be surprised if the process takes several months. The goal is to find a property that meets your requirements and preferences, and the process of finding the right home takes time.

You can speed things up and be more efficient with your search by tapping the expertise of a real estate agent. However, you may also rely on the following to help widen your search:

  • Real estate websites and online searches
  • Newspaper advertisements and real estate magazines
  • Social media
  • Visiting new housing developments and homes with “for sale” signs
  • Word of mouth or recommendations from family and friends


Factors to consider when choosing a home

Purchasing a new home is a long-term commitment that will significantly affect your finances and your lifestyle for many years to come.

Take the time out to do your background research on different neighbourhoods to narrow down your search. Most city websites will have a guide to each neighbourhood with extensive details. This is why it’s crucial that you take your time to consider the following factors before making a decision:

  • Location
    • What’s your ideal area of residence (downtown, suburbs, rural area, etc.)?
    • Do you want your home to be close to your job, schools, public transportation, etc.?
  • Size
    • How many bedrooms or bathrooms do you need?
    • Do you need a garage or extra storage space?
  • Amenities
    • Do you want to have a swimming pool or a fireplace room?
  • Lifestyle
    • Do you want to have children?
    • Do you expect an “empty nest” soon?
    • Will you retire in a few years?


 Types of homeownership

Aside from determining whether you are fit to be a homeowner, you must also decide what type of homeownership you think suits you the best. You have a variety of options in Canada, but the following are among the most common types:

  • Freehold
    • You have ownership of the building and the ground it stands on, which means you have full use and control of the property. However, you are responsible for its maintenance and must pay for the costs.
  • Condominium (“strata”)
    • You have ownership over your condominium unit, but the common areas (e.g., gardens, hallways, lobbies, elevators, etc.) are co-owned with other unit owners.
    • Repair and maintenance of the common property and assets are the responsibility of the condominium corporation.
  • Leasehold
    • You have the right to use and occupy the buildings and the land for a defined period (e.g., 99 years), but ownership remains with the landlord.
    • This type of ownership is often used for townhouses or apartments which stand on city-owned land.
  • Co-operatives (co-ops)
    • You purchase a share in the whole building instead of buying a specific unit. You are then assigned to live in a particular unit. Should you choose to sell your share, the members of the co-op board may choose to reject the offer of a potential buyer if they believe he or she is not a good fit for the community.
    • Mortgage loan insurance isn’t offered for co-operatives. As such, homebuyers must prepare at least 20% of the purchase price as down payment.


Who do I need to work with to buy a home?

First-time and experienced buyers alike could benefit from having a team of professionals with extensive experiences in the real estate industry.

It pays to recruit qualified and experienced professionals who will help you in the subsequent steps you need to take after you have already found your new home. They will guide you throughout the home-buying process so that you can make the best decisions and successfully close the deal.

Real estate agent

An agent essentially helps you navigate through the complicated world of real estate. Aside from finding you a home, they will act on your behalf to make an offer and negotiate the best possible deal. They can also connect you with other experienced professionals you may want to recruit for your team.

Insurance broker

An insurance broker can help you with getting property insurance and mortgage life insurance.

Home inspector

An inspector will evaluate the current condition of the house and advise you if any major repairs or replacements are required.


Before you make an offer, an appraiser will tell you how much a property is worth, saving you from potentially overpaying.

Land surveyor

If a seller doesn’t have a certificate of location, you need to hire a surveyor who will visit the property to complete your mortgage application.

Builder or contractor

You will need a contractor or builder if you plan to build a new home or renovate the house you purchased.

Lender or broker

A mortgage broker can connect you to various lending sources (banks, credit unions, trust companies, etc.).

Lawyer or notary

A lawyer (or notary in Quebec) is tasked with protecting your legal interests.

How do I make an offer?

After months of searching, you finally found “the one” – a new home that’s within your budget and meets most (or all!) of your preferences. And so, the time has come for you to make an offer and officially close the deal.

But where to begin?

To officially make an offer, you need to submit to the seller an offer to purchase. Also known as an “agreement of purchase and sale.” This is a legal contract that must be drafted by a lawyer (or notary in Quebec) and/or a real estate agent.

The offer should contain the following details:

  • your legal name as “buyer” and the name of the property owner as “seller”
  • full legal description and address of the property
  • total purchase price
  • date and amount of your deposit
  • additional items you want to be included in the purchase (e.g., appliances, fixtures, decorative items, etc.)
  • proposed closing date (when you want to take possession of the property)
  • proposed move-in date (usually not the same as the closing date)
  • a request for a current land survey of the property
  • the expiration date of the offer
  • any other conditions that must be met (e.g., satisfactory home inspection)

The contract becomes final when all the stipulated conditions are met. But before that happens, you should expect some negotiation, since you, and the seller, are both aiming to get the best possible deal.

Getting a mortgage

If the offer is accepted, it’s time to meet with your lender or broker to finalize the approval of the mortgage. Ideally, you will have done this prior to even seeking out your property so you knew the financial perimeters you could work within.

You will need to provide the following details at this point in the home-buying process:

  • the property’s legal description
  • the building specifications
  • the listing or photographs
  • an updated property tax assessment
  • an appraisal
  • a home inspection report
  • a land survey
  • estimates for renovations and improvements
  • heating and utility costs
  • the signed offer to purchase

What happens when I close the deal?

Closing day is what homeowners are all waiting for. It’s a day of triumph since you finally get legal ownership of your new home.

The final signing usually takes place at your lawyer or notary’s office where the following events also transpire.

  1. The lender hands over the mortgage money to your lawyer or notary.
  2. You entrust your down payment to your lawyer or notary, including the closing costs and other fees.
  3. The lawyer or notary will be the one to pay the seller and register the property in your name.

The whole home-buying process is completed once you receive the property deed and the keys to your new home.

Congratulations! You are now officially a homeowner. For more on how to best navigate the process of purchasing a home in Canada, please consult one of our professional mortgage brokers for a free consultation. It pays to have the right person on your team!

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