Buying a Canadian home is a dream for all those newcomers who need to settle in the country. However, buying a home does come with infinite responsibilities and financial stress.
New immigrants face numerous challenges while purchasing a home in Canada. According to official data, the number of new immigrants purchasing a Canadian home is far more than that of Canadians. Therefore, it isn’t impossible if you are a newcomer looking to buy a new home in Canada.
Apart from this, newcomers need to analyze and understand the Canadian labor market if they really wish to buy a Canadian home.
Decide the place where you’d reside in Canada
Canada is a vast country, and the entire process of buying a Canadian home will depend upon your choice of location within the country. For instance, rural areas and small cities are comparatively more affordable than the bigger cities in Canada.
The average cost in Canada for all types of houses is $375,000, excluding Toronto and Vancouver, while the average cost of buying homes in Canada, including both large cities, is CAD $472,000.
House prices are relatively higher in Toronto and Vancouver because they are at the heart of Canada. However, if you’re ready to explore other places to buy a home, you can rely on other smaller cities for affordable houses.
Numerous people who newly immigrate to Canada also prefer cities like Winnipeg, Ottawa, or Edmonton rather than Vancouver and Toronto. These are at least less expensive than Toronto and Vancouver in terms of housing costs.
The popularity of Toronto and Vancouver is because they have busier industries and vast immigrant communities. It is easier to work and more convenient to develop cultural communities.
However, you could choose the neighboring cities if you can’t afford these two big cities. People can choose to live in Hamilton, Markham, and Mississauga. All three cities are located in the vicinity of Toronto but offer cheaper housing rates. Even though these are smaller cities, they do have immigrant communities that can help you build strong networks with other newcomers.
Decide the type of home you want to buy
Newcomers have the option of buying all types of homes, each of them having a different price.
Have a look at the types of homes:
Condominium– This is also known as ‘Condo,’ and its location lies within a larger building. Suppose you buy a Condo; you won’t have access to the entire building or property. This implies that you will only have access to a particular unit.
Single or Detached home– It is an independent property without sharing with the neighboring property or building. It’s your responsibility to look after the land or building. This house type tends to be the most expensive of all the types of Canadian housing.
Semi-detached– The land and the entrance part are independent of this housing type. However, the wall is common for the neighboring house.
Duplex or Triplex– A Duplex or Triplex forms a single building but comprises various independent units. Most people might find this appealing because it gives them a chance to put the other units on rent. This further helps them gain the amount to pay for the property.
Downtown Toronto won’t have as many detached homes as the number of condos. It isn’t possible to own an expensive detached home in this place. However, Condos are available here.
Contrarily, if you wish to live outside prominent Canadian cities, detached homes will be more relevant in terms of affordability.
Analyze the amount of money you can spend on your home
The mortgage system is highly prevalent in Canada, and this system revolves around the buying of properties and houses.
Once you decide to spend a specific amount of money on purchasing a home, you must understand the entire process.
Newcomers can benefit from the mortgaging system in Canada
Newcomers can buy homes through the mortgaging system in Canada. Under this system, they can pay a down payment or deposit for the house and later on purchase the rest of the house through the mortgage. The individual seeking to purchase a house will have to repay the mortgage in the following years. He will also need to pay the interest with that payment to the lender.
The following essential rules of the mortgage system within Canada will help you understand the real estate market in Canada:
Down payment
As a newcomer buying your first home will cost you a down payment of five percent of the total expenditure of the house. However, make sure that the down payment you create is larger than this. Paying the down payment of more than twenty percent will allow the newcomer to avoid paying for mortgage insurance.
As a new immigrant to Canada, banks might demand a strong credit history in the country to give their consent for a small down payment. However, newcomers also get access to mortgages, provided they can pay at least 35 percent of the down payment, which is relatively higher. Conversely, you can also wait to gain a considerable work experience in Canada and attain a credit history. Once you do this, you will have the chance to apply for a smaller down payment under the normal mortgage system. Additionally, you could choose the location of your choice and experience a better life in the country.
Purchasing a brand-new Condo in downtown Toronto will cost you around CAD $750,000. With this example in mind, the following down payment options will be valid for you; the following down payment options will be valid for you:
Down payment of 5 percent
Five percent, or $37,500, is the minimum requirement for the down payment in Canada. Paying this amount also implies paying for mortgage insurance.
Down payment of 20 percent
You will not need to pay the mortgage insurance if you can afford the 20 percent down payment. The amount will remain around $150,000.
The maximum down payment of 35 percent
Some of the banks in Canada demand a down payment of 35 percent before the new immigrants can build a strong credit history.
Mortgage options for repayment of the amount
Once you avail of a mortgage, you automatically get into a repayment period. This period is quite long as it lasts a few years. These individuals usually take approximately 20 to 25 years to repay the complete mortgage. The time it takes to repay this amount refers to amortization.
On the other hand, lenders often use the term called mortgage term. This term implies the time duration for which the individual is restricted to a particular lender at a fixed rate.
The mortgage term’s duration is over five years. However, usually, mortgage terms lie between one to two years.
The mortgage rate paid by an individual will differ based on the term you opt for. The mortgage term also comes to closure, and you will also undergo the mortgage renewal. However, you will also have the opportunity to check different mortgage options to search for a lender at a reduced rate.
Mortgage Rate
Once you undertake the mortgage, you will also require to pay the mortgage interest. Lenders will always provide you with different costs and rates. However, your sole responsibility is to read the contract carefully and analyze whether the offers appear more than reasonable. Sometimes they might lure you with rates that appear too good to be true. Consider all the terms and conditions before you actually seal the deal with the lender.
You will also have the alternative of choosing between fixed and variable mortgage rates. The fixed rate will not surprise you because it will align with the interest rate per the mortgage term. Contrarily, the variable rate will largely depend upon the prime market rates. Apart from this, the leading Canadian financial institutions fix the prime rate yearly to give direction to lenders. For instance, if the market performs well, but the prime rate reduces, you will also pay less. On the other hand, if the prime rate increases, you will have to pay an enormous amount.
Overall, the variable rate carries significant risk.
Mortgage lenders in Canada
Most prominent banks provide mortgage options to newcomers, so they prefer to opt for financial institutions. These institutions have a significant role to play because of their long-term reputation and credibility. Additionally, they also serve as the most reliable options for people. Apart from this, mortgage lenders are also available but you will need to conduct thorough research.
If you’re looking forward to buying a Canadian home within the first two years of arriving in the country, you must ask the lender about the probability of a mortgage without having a strong credit history.
Buying a Canadian home in Canada as a newcomer- steps involved
You will need to follow the given steps if you’re buying a Canadian home:
Plan your financial budget
Buying a Canadian home or property requires an absolute financial commitment. Therefore, it is much better to prepare for the following:
- Learn about your credit rating.
- Evaluate your household income and budget.
- Get pre-approval for your mortgage.
- Examining all the one-time costs, including legal payments, down payment, inspection fee, property transfer, and taxes.
- Gaining insights into the monthly costs such as mortgage payments, maintenance, property taxes, and insurance premiums.
Getting in touch with a realtor or real estate agent
Searching for a realtor or real estate agent is optional. You can certainly buy a Canadian home even without a realtor and real estate agent. However, if you do opt for one a realtor or agent, then you must look for someone reliable who will act as an advocate, consultant, or negotiator.
Research your options
Visit as many properties as possible and ask important questions about storage space, plumbing, ventilation, water damage, and wall or ceiling cracks.
Provide a legal agreement
The legal agreement is also known as the offer and contains terms and conditions related to purchasing a Canadian home.
Conditions could include home inspection or financing. Once the seller accepts this, he becomes legally bound.
Conclusion
Make sure you follow all the given tips and suggestions before making a final decision on buying a Canadian home.
