As a newcomer, you might dream of buying a place to call your own. Before that dream becomes a reality, it's important to learn how the process works. Here's what you need to know to get on track to buy your first home.
Of course! However, most people don't have enough money in savings to pay the full cost of a property. The average home price in Canada (including detached and semi-detached houses, townhouses and condos) is $626,3181. In cities like Toronto and Vancouver, homes are even more expensive — often over $1 million. So, buyers usually pay a part of the cost right away, which is also referred to as a "down payment," and borrow the rest of the money as a mortgage loan. They then pay the loan back, with interest, over a set period.
Banks and other lenders use a set of rules to figure out which buyers can get a mortgage and how much they can borrow. So even though all newcomers are allowed to buy homes in Canada, in most cases, you'll need to meet the financial institution's rules to get approved for a mortgage first.
Watch the Buying Your First Home in Canada webinar hosted by Scotiabank and Prepare for Canada to better prepare yourself before making your first big purchase. The webinar covers the following topics:
There is also a Q&A portion at the end of the webinar that addresses common questions newcomers have around home buying.
To get a mortgage, you need to have stable a income and prove you can afford the mortgage payments. Before approving your loan, mortgage lenders will also look at:
You'll have an easier time getting a mortgage — and lower interest rates on the loan — if you have a record of responsible borrowing in Canada. Here are a few ways you could create a good credit history as a newcomer to Canada:
As a newcomer, there are a few different types of mortgages you can apply for. Which one you choose depends on your work history, credit history and how much money you have for a down payment.
Temporary residents and permanent residents who have been in Canada for less than five years can apply for a newcomer mortgage.
To get a newcomer mortgage, you must have a full-time job in Canada where you've worked for at least three months. You also have to either:
Each financial institution will offer different programs – learn more about Scotiabank’s here.
If you need mortgage default insurance, your lender will apply for it for you from one of the three providers in Canada: CMHC (Canada Mortgage and Housing Corporation), Sagen and Canada Guaranty. You can either pay for the insurance all at once in a single payment or add the amount to your mortgage loan and pay it off over time.
If you don't have much of a credit history in Canada, the provider might look at your rent payment history or an international credit report instead.
Now that you understand how to get a mortgage in Canada, here are the steps to follow when buying your first home here.
House hunting can be time consuming and overwhelming. So, before you get started, figure out the types of homes that are within your budget by using an affordability calculator.
Things can happen fast when you find the home of your dreams, so be sure you have a mortgage pre-approval before you start making any offers. This will give you a good idea of how much you can borrow, the rate of interest you'll pay on your loan, and how much your mortgage payments will be. A pre-approval is usually valid for up to 120 days.
With the information from your pre-approval, you can now research the homes and neighbourhoods in your price range. Then, feel free to start attending open houses and viewings. Most buyers use a real estate agent to help them with their search and guide them through the process, but you can also use an online home-search service or look on your own.
Once you find a home you like that is in your budget, you (or your real estate agent) will prepare an offer on paper. The seller can accept the offer, reject it or come back to you with a counteroffer. Plan to include a deposit (which can range from 1% to 3% of your full offer amount) with your paperwork. The deposit shows you're a serious buyer with enough money to complete the sale. If the seller rejects your offer, you'll get your deposit back.
A home can sometimes have problems that you're unaware of and could be expensive to fix. So, it's important to have a professional do a home inspection, which costs a few hundred dollars. An inspection is usually included as a condition when you make an offer.
You'll need to hire a lawyer to help handle the legal aspects of the sale. At this point, you'll also contact your lender to complete your mortgage documents. Make sure you have extra money set aside for these closing costs, including land transfer taxes, if they apply.
While there's no newcomer homebuyer incentive in Canada, there are a few financial benefits for first-time buyers. For example, the First-Time Home Buyers' Tax Credit is worth up to $1,500, which you can claim on your annual tax return. You may also be eligible for a shared equity mortgage program (called the First-Time Home Buyer Incentive). And depending on the province you live in, you could also get a rebate on your land transfer taxes.
Now that you know the basics of buying a home as a newcomer, you're on your way to making the dream of homeownership in Canada a reality. Learn more about Scotiabank's mortgage options for permanent residents and temporary residents online, or book an appointment with a home financing advisor to find out the latest information on the best mortgage options for you. You can also book an appointment with a Scotia advisor to learn more about our Scotiabank StartRight® Program offerings for newcomers like you.
This article is provided for information purposes only. It is not to be relied upon as financial, tax or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article, including information relating to interest rates, market conditions, tax rules, and other investment factors are subject to change without notice and The Bank of Nova Scotia is not responsible to update this information. All third party sources are believed to be accurate and reliable as of the date of publication and The Bank of Nova Scotia does not guarantee its accuracy or reliability. Readers should consult their own professional advisor for specific financial, investment and/or tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.
1 Canadian Real Estate Association, January 2023. https://www.crea.ca/media-hub/news/canadian-home-sales-edge-up-to-end-2022/