From the great outdoors to staying indoors: whatever lifestyle you’re after, you’ll probably find it in Canada. And even if you’re not a Canadian citizen or resident and are just spending part of the year there, you’re entitled to buy a place of your own you can call home (even if only for six months at a time). Here’s how…
Am I entitled to buy a home in Canada?
Canada has few stipulations about who can and can’t buy property. Even as a non-resident, you have the same ownership rights as residents and citizens of Canada. There are no signs that that is likely to change any time soon, but it is getting more expensive for foreigners to buy property in some places: in April 2017, the Government of Ontario introduced the Non-Resident Speculation Tax (NRST), a 15% tax on the purchase of residential property in the Greater Golden Horseshoe region of the Toronto area by people who aren’t citizens or permanent residents of Canada.
Where are the best places to buy in Canada?
What are you after? Cosmopolitan living? Shorelines lined with chichi craft shops? Frozen wastes? Rocky Mountain vistas? All-round winter sports? There’s no shortage of choice in Canada.
Let’s start with cost. In the latest annual cost of living survey by Mercer, Toronto and Vancouver came joint 109th in the league table of the world’s most expensive cities. Also on the list are Montreal and Calgary. Meanwhile, a survey by Slice.ca reveals that Canada’s five cheapest cities are all in Quebec: Sherbrooke, Laval, Saguenay, Lévis, and Terrebonne. So ‘polish up your French’ is our advice.
Best places to live? Well, the conclusion of moneysense.ca is that, thanks to its strong economy, low crime rates and great weather, that crown goes to Oakville, Ontario. Not only is it the best place to live overall, it’s the best place for New Canadians, the third best place to retire and the fifth best place to raise a family.
How much can I afford?
If you need a mortgage, then you’ll be told the answer to this question quickly and in no uncertain terms. As a rule of thumb, according to Canada Mortgage and Housing Corporation (CMHC), your monthly housing costs (mortgage payments and utilities etc) should not exceed 30% of your gross monthly income and your entire monthly debt load (your mortgage payments plus those of all your other debts) should be no more than 40% of your gross monthly income.
Finding a property
Before we get too far ahead of ourselves: if you’re going to need a mortgage, look into that before you start looking for your dream home. By getting pre-approval on a mortgage you’ll know exactly what you can and can’t afford. Some realtors won’t even speak to you until you’ve done this.
Once you know exactly what you can afford – and not before – start looking online to see what grabs your fancy. The realtor.ca site, for example, lists hundreds of thousands of homes for sale across the whole of Canada.
Also brief your realtor…
The role of the realtor – and who pays
Most house sales are conducted through a realtor. Two in fact – one for the seller and one for the buyer. A Brit’s first reaction is to wonder why, because we are so inured to the ridiculous notion that the estate engaged by the seller could also take into account the buyer’s interests.
The good news is that if the seller is using a realtor, he or she will pay both their realtor’s fees and yours. If the seller isn’t using a realtor, be sure to agree who is going to pay your realtor’s fees – if you don’t, those charges could end up in an invoice to you.
Getting a mortgage in Canada – all the information you need
What’s the maximum mortgage I can get?
In Canada, the minimum down-payment on a property is 5%. If you’re putting down less than 20%, you’ll need mortgage default insurance, either from CMHC (Canadian Mortgage and Housing Corporation) or a private insurer. To obtain this, you’ll need to be able to satisfy the insurer that you’re going to be able to service the mortgage repayments.
If you’re a non-resident, you’ll only be able to borrow 65% of the purchase price and so will need to stump up a down-payment of at least 35%. As foreign banks aren’t allowed to register mortgages in Canada, you’ll have to use a local one. Expect plenty of interviews and demands for endless documentation and information.
Where to find a mortgage
You can go directly to a bank or to a mortgage broker. The advantage of the latter is that he or she will know the ins and outs of the mortgage marketplace and find one that suits your needs. They also get access to preferential rates. Brokers are especially useful if you fall outside the easy-to-assess ‘payroll monkey’ category – for example, if you’re self-employed, a contractor, own your own business etc.
If you’re non-resident, make sure you choose a broker who is familiar with mortgages for foreign buyers.
The true cost of buying a home
When determining a suitable price range, be sure to budget for everything. Your realtor can help you do this. Some of the costs may not be obvious:
- The purchase price
- Property or land transfer tax – this varies from province to province
- Possible bank appraisal fees
- Home inspection costs (the equivalent of a survey in the UK)
- Home insurance – your mortgage lender will make it a condition of the loan
- Legal fees
- A new-build home may attract a Goods and Service Tax (GST) or Harmonized Sales Tax (HST) – check with the seller if it’s included in the price quoted or not
- If you’re buying in Ontario’s Greater Golden Horseshoe Region and you’re not a resident or citizen, you’ll have to bay a Non-Resident Speculation Tax (NRST) of 15%
- A variety of other ‘closing fees’ which could include a condominium estoppel certificate or a township levy. Again, your realtor will advise you
Do you really need a realtor?
Why wouldn’t you? The seller is going to pay your realtor’s fees anyway. Your realtor will:
- Take some of the legwork out of finding your ideal home
- Bring a valuable knowledge of both property and the area to the table
- Negotiate a better price on your behalf
- Help with legal contracts
- Is registered with the Real Estate Council or equivalent for your province
- Knows the neighbourhood inside out
- Specialises in representing buyers
- Has solid experience
- Is a full-time realtor (many do it as a second job)
- Has been recommended to you by someone who’s actually used them, or…
- … has good and credible reviews online
- The purchase price you’re prepared to pay
- Any items you want included such as appliances or furniture
- The deposit amount (up to 10% is common)
- The financial details of any mortgage you’ll be taking on
- Required closing date for the sale (usually 60-90 days)
- The period for which the offer is valid
- Any other conditions – for example, you might want to insist that a leak is fixed, a door replaced or a fence mended
A real estate agent is legally obliged to look out for your interests and is bound a code of ethics.
Choosing your realtor
Find a realtor who:
If you’re a non-resident you should also make sure you find a realtor who understands the ins and outs of foreign property ownership.
Surveys (aka home inspections)
Although a home inspection is not required by law, you should never risk purchasing a property without one. Home inspectors are regulated in some provinces but not in others, so choose with care and never take one suggested by the seller.
See the Canadian Association of Home & Property Inspectors website at cahpi.ca.
The process of making an offer
Once you and your realtor have agreed that this is the house for you and have come to a decision about a sensible price, he or she will put together an offer-to-purchase and send it to the seller.
The offer typically specifies:
You may be expected to include a deposit of no more than 10% of the property price but this is refundable in the event of the sale falling through.
Bear in mind that you could be in competition with other bidders, so don’t try to squeeze the seller too hard.
What to look for in a lawyer
In Canada, it’s common practice only to involve a lawyer in the later stages of buying a property. Their principal jobs are to review the paperwork, conduct a title search, register the deeds, look after the transfer of funds, and generally help you avoid falling foul of any traps. But the earlier you involve them, the better. Not only could they save you time and money, they could reduce the risks.
If friends and family are unable to recommend someone, find a lawyer through the law society of your province.
If you’re non-resident, make sure you find a lawyer familiar with the intricacies of overseas property ownership.