Home Buyer's Guide

Figure out how much you can afford for a home

Homeownership can be very exciting. 

According to Canada Mortgage and Housing Corporation (CMHC), your monthly housing costs should not be more than about 35% of your gross monthly income. This includes costs such as mortgage payments and utilities.

Your entire monthly debt load should not be more than 42% of your gross monthly income. This includes your mortgage payments and all your other debts.

Saving for your home

To buy a home, you need a down payment. You also need money to pay for the upfront costs.

Make saving part of your monthly budget. Most employers deposit your pay directly into your chequing or savings account. Increase your chances of reaching your savings goals by setting up automatic transfers to a savings account each pay cheque.

Saving with a Tax-Free Savings Account (TFSA)

A TFSA is an account that lets you save or invest your money tax-free. You won’t pay tax on money you withdraw from your TFSA. You can also use your TFSA to help you buy a home.

Saving with a Registered Retirement Savings Plan (RRSP)

An RRSP is an account that allows you to save money for your retirement. You don’t pay taxes on your savings until you withdraw money from the RRSP.

The Home Buyers’ Plan (HBP)

If you’re a first-time homebuyer, the HBP allows you to withdraw up to $35,000 from your RRSPs tax-free to put toward buying your first home.

The First-Time Home Buyer Incentive

This incentive offers 5% or 10% of your home's purchase price to put towards a down payment. 

Learn more about the First-Time Home Buyer Incentive.

Using savings and investment

If you plan to buy a home in the near future, focus on building your savings. You’ll want to keep your money protected and easily accessible.

Short-term savings and investment options may include:

• savings accounts

• short-term guaranteed investment certificates (GIC)

• low-risk mutual funds

Ask your financial institution or advisor about the short-term investments they offer and how they work.

Paying for your home

Most people need to borrow money to buy a home. You also need to put some of your own money into the purchase.

Down payment

When you buy a home, you must put a certain amount of money toward the purchase upfront. This is called a down payment. Your mortgage loan will cover the rest of the price.

Mortgage process

A mortgage is likely the biggest loan you get in your lifetime. It’s important that you understand the process.

Shop around for a mortgage

Lenders may have different interest rates and conditions for similar mortgages. Talk to several lenders to find the best mortgage for your needs.

You can get a mortgage from:

Mortgage lenders – These institutions lend money directly to you. Explore the different types of lenders that are available, including banks and credit unions.

Mortgage brokers – They don’t lend money directly to you. Mortgage brokers arrange transactions by finding a lender for you. Since brokers have access to many lenders, they may give you a wider range of mortgages to choose from. The lender pays a commission to the mortgage brokers, so there’s no cost to you.

Get the mortgage that meets your needs

Mortgages have different features to meet different needs. It’s important that you understand the options and features.

Questions you should ask yourself include:

• do you want a mortgage with a fixed interest rate or one that can rise or fall

• how long of a term do you want

• how often would you like to make payments toward your mortgage

Mortgage loan insurance

If your down payment is less than 20% of your home’s price, you need to purchase mortgage loan insurance. In some cases, you may need to get mortgage loan insurance even if you have a 20% down payment.

Mortgage loan insurance protects the mortgage lender in case you’re not able to make your mortgage payments. It does not protect you. Mortgage loan insurance is also sometimes called mortgage default insurance.

Optional mortgage life, critical illness, disability and employment insurance

Your lender may ask whether you would like to purchase life, critical illness, disability and employment insurance.

These products that can help make mortgage payments, or can help pay off the remainder owing on your mortgage, if you:

• lose your job

• become injured or disabled

• become critically ill

• die

There are important exemptions for each of these insurance products. An exemption is something not covered by your insurance policy. Read the insurance certificate before you apply to understand what this insurance covers.

These insurance products are optional. You don’t need to purchase this insurance coverage for your mortgage to be approved. You must clearly agree to sign up for this insurance before the lender charges you for it.

Tax credits for homebuyers

The Government of Canada offers two tax credits for specific types of homebuyers. Your provincial or territorial government may also offer other home-buying incentives.

The Home buyers’ amount

You get access to this tax credit when you purchase your first home and submit a tax return. It’s an effective means of offsetting some of the upfront costs associated with buying a home. Eligible homebuyers may receive a tax credit of up to $750.

GST housing rebates

Generally speaking, sales of new homes are subject to the GST. You may qualify for a rebate for some of the tax you paid.

Moving expenses

You may move into a new home to work or run a business in a new location. You can deduct eligible moving expenses from the employment or self-employment income that you earn in the new location.

Home buying costs

When you buy a home, you have to pay for upfront costs in addition to your mortgage. These are called closing costs. 

Legal costs

You have to pay legal fees on your closing day. This is the day that your home purchase is complete. These fees are usually range between $400 to $2,500 but will vary depending on your lawyer’s or notary’s rates.

A lawyer or notary can help protect your legal interests. They make sure that the home you want to buy does not have a lien against it. A lien is a legal claim over another person’s property that someone files to ensure a debt gets paid.

A lawyer or notary reviews all contracts before you sign them. They also review your offer or agreement to purchase.

Home insurance

You must have home insurance in place as a condition of getting a mortgage.

Home insurance can help protect your home and its contents. It typically covers the inside and outside of your home in case of theft, loss or damage.

Land registration

Before the sale closes, you’re required to pay to register your property’s title under your name. This may be called a land transfer tax, a deed registration fee, a tariff, or a property transfer tax.

The cost is a percentage of the home’s purchase price. For example, if your land transfer tax is 1.5% and your home cost $300,000, you pay $4,500.

Adjustment costs

The seller of the home you’re buying may be entitled to adjustments. For example, the seller may have already paid the property tax on the home past the purchase closing date. If that’s the case, the seller receives a credit on the closing date. You must then pay this credit amount to cover the money already paid by the seller.

New build GST

Generally, if you buy a new build home, you pay GST. 

Other home-buying costs

Other costs you may need to budget for include:

Home appraisal

Mortgage lenders may ask you to have an appraisal done as part of the mortgage approval process.

An appraiser provides a professional opinion about the market value of the home you want to buy. An appraisal fee is generally between $350 and $500.

Home inspection

An inspector provides a comprehensive visual inspection of a home’s overall structure, major systems and components such as:

• electrical and plumbing systems

• the foundation

• the roof

CMHC recommends that you include a home inspection as a condition when you make an offer.

Moving costs

• Depends on your situation, where you are moving from and if you will be hiring someone to help you.

Working with a real estate agent

A realtor typically searches for homes, checks the legal title of the property, gathers material information about the property, negotiates a purchase price, helps the buyer present offers to the seller's agent, assists with subject clauses to protect buyer's interest, fills out and file paperwork, and owes fiduciary duties of loyalty, confidentiality and full disclosure towards his client.

The seller pays the realtor’s fees when you buy a home.

Home buying and newcomers to Canada

CMHC has a guide with comprehensive information on housing for newcomers.

Consult Buying Your First Home in Canada: What newcomers need to know.

Buying a condominium

Condominiums, or condos, are shared properties that contain individual housing units. Each unit has its own owner. Owners share the common areas outside of the unit such as the lobby and parking lot.

If you buy a condo, you pay monthly condo fees. However, you may like the idea of sharing the building maintenance costs with the other unit owners.

Buying to rent

You can buy a property with the intention of renting it out. Keep in mind that you have to declare your rental income at tax time each year.