How to buy your first home in Canada

This article was produced in partnership with HSBC Canada.

There’s nothing like the feeling of getting the keys to your first home in Canada. You walk through the front door and know it’s yours, and let your imagination run wild with plans for the future. As the years go by, each room becomes an album for your memories and milestones, your good years and hard years, as you carve out a life for yourself and your family. 

Getting your first home in a new country is undoubtedly stressful. That’s why we’ve teamed up with the experts at HSBC Canada to help you understand how to navigate the Canadian real estate market. Many Canadian residents have gone through this process before you, so it is possible. Plus, in recent years immigrants have surpassed their Canadian-born counterparts when it comes to homeownership rates, so buying your own home as an immigrant in Canada: it’s achievable.

Empower yourself to make the best decision about your new home by informing yourself about the Canadian market. And when it comes to financing your new home, empower yourself by choosing one of Canada’s most trusted banks. HSBC’s Newcomers Program is tailor made for newcomers like you. Check out the HSBC Newcomers Program to learn how you could be eligible to receive up to $1,350* in value.

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The city of Toronto is one of Canada's most popular destinations for new immigrants and one of the country's most expensive cities to buy a home.

You already know that Canada is a big country, and you probably realize that where you choose to live will have a big impact on the process of buying your home. In smaller cities and rural areas, the cost of a home is significantly cheaper than in some of Canada’s larger cities.

In 2018, the average cost of a home in Canada was CAD $472,000; this includes all types of homes (condos, houses, duplexes, etc.). But this figure is hugely influenced by two cities, Toronto and Vancouver, where the cost of a home is significantly  higher than the average for the whole country. If you remove Toronto and Vancouver from the equation, the average home in Canada costs $375,000. 

If you’re willing to live outside the major cities, you’ll be able to find a nice home in Canada at an affordable cost. But if you’ve got your heart set on living in Toronto or Vancouver, you have to prepare yourself for the home prices in these cities. You can expect housing prices to be double the national average if you’re looking in Toronto or Vancouver. We’ve seen many immigrants drawn to cities like Winnipeg, Ottawa, and Edmonton, where there are still big immigrant communities, but housing costs are much lower compared to Toronto and Vancouver. 

That said, the Toronto and Vancouver areas are popular destinations for newcomers to Canada, and to some extent higher living costs are offset by higher wages. Both cities have bustling industries and big immigrant communities, so they are great places for finding work and connecting with specific cultural communities. 

If you want to have access to Toronto or Vancouver, but you can’t afford a house in the city, consider one of the neighbouring cities. For example, many newcomers who want to be near Toronto will opt to live in Markham, Mississauga, or Hamilton. These three cities are close to Toronto, but offer better affordability when it comes to buying a home. As well, all three of these smaller cities have big immigrant communities, so you’ll have the chance to meet other newcomers who’ve experienced a journey similar to your own.

Over the years, we have seen that many newcomers to Canada will first gravitate towards the city centres. You might come to Canada with temporary status, on a work permit or study permit, and so your place of employment or university may be in or near the downtown core, affecting your decision on where to live. After securing permanent residence, however, many people tend to think about extra space for themselves and their family, and may be more conscious of affordability over the longer term. Outlying suburbs and smaller cities might become front of mind, particularly for those who want to purchase a home in Canada.

Take your time. Talk to your friends, your coworkers, your neighbours. Canada is a friendly place and that’s probably one of the reasons you moved here. The people around you will be more than happy to share their stories about buying homes in Canada. Let them share, and allow their experiences and advice to guide you on your home buying journey.

These side-by-side townhouses are popular in the bustling Canadian cities of Toronto, Montreal, and Vancouver.

Once you’ve decided on where you want to live, the next step is figuring out what type of home best fits your budget and your needs.

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Not all types of homes are the same, and each type has a different price level. Let’s take a look at your options:

Condo/Condominium: A condo is a unit within a larger building. If you’re buying a condo, you won’t be buying the entire building or the entire property, but just your own unit. In busy city centres, condos are often the best options available on the market. 

Single/Detached: A detached home is a building located on its own property that shares no walls with neighbouring properties. You own, and are responsible for, the land and the building. This tends to be the most expensive type of housing in Canada.

Semi-Detached: A semi-detached home is a property with its own land and entrance but which shares a wall with a neighbouring home.

Townhouse: A townhouse is a home which is attached to other homes on both sides. These types of homes are typical in Canada’s major cities.

Duplex/Triplex: A duplex or triplex is a single building that has been divided into multiple, separate units. This can be attractive for some buyers because they can rent out the other units as a means of offsetting the cost of the property. Maybe you’ve got kids, and once they’re accepted to university, they can rent one of the units (whatever it takes to keep them close to home!).

Condos are a popular option for home buyers in Vancouver. But, if you want that ocean view expect to pay extra!

It’s important to set realistic expectations for the type of home you can afford based on the area you want to live. In downtown Toronto, you’ll find it difficult to locate a detached home, much less afford one (we’re pretty sure that even Drake lives in a condo building), but you might be able to find a condo that will suit your needs. On the flipside, if you’re willing to live outside Canada’s most popular cities, a detached home becomes much more affordable.

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Like many countries around the world, Canada uses a mortgage system to organize the purchasing of homes and properties. Make sure you understand these concepts before you move forward in your buying journey. 

Mortgages in Canada for newcomers 

Under the mortgage system, a home buyer will pay a down payment (known as a deposit in some countries) for their home and then pay for the rest of the home using a mortgage. A mortgage is a financial loan from a lender, often a bank, used to finance the purchasing of a home. The home buyer then repays the mortgage over a period of years, with an interest portion also being paid to the lender. 

Let’s go over the basics of mortgages in Canada, so that you know exactly what to expect on the Canadian real estate market.

Down payment

In Canada, the minimum possible down payment for a new home is five percent of the total cost of the home. However, it is often recommended to make a larger down payment than this. If the home buyer can pay a downpayment of 20 percent or above, then usually they are not required to pay for mortgage insurance. 

As a newcomer to Canada, you may not have the credit history in Canada that many banks and other lenders require in order to approve a mortgage with only a small down payment. But! Many banks and lenders offer mortgages for newcomers, provided that the newcomer can afford a higher down payment, usually around 35 percent. 

Alternatively, you can wait until you have worked in Canada for a couple of years and established a credit history, and then apply for a mortgage through the regular channel, with a smaller down payment required. Plus, this way you have the opportunity to experience life in Canada and really be sure that you’re choosing a location you enjoy.

Let’s say you’re looking to buy a new condo in downtown Toronto. You find a sleek new unit, with a great view, and a gym (you’ll have no more excuses to skip leg day!). The price of the condo is CAD $750,000. As far as your down payment is concerned, here are your basic options:

• Option 1 - 5% down payment - $37,500 This option illustrates the minimum required down payment percentage in Canada. If you pay this amount, you’ll have a sizeable mortgage and you’ll be required to pay for mortgage default insurance. 
• Option 2 - 20% down payment - $150,000 If you can afford the 20% down payment, then there’s a good chance you’ll be exempt from needing to pay for mortgage default insurance.
• Option 3 - 35% down payment - $262,500 This is the down payment percentage required by some banks for newcomers to get a mortgage before they have established a credit history in Canada.

Just to continue the example, if you were to buy a $375,000 home in Winnipeg, your 35% down payment would be around $160,000. Consider the difference between prices when you’re deciding where you want to live in Canada. 

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Mortgage term vs amortization

When you receive a mortgage, typically you will enter into a repayment period that will last quite a few years. Homeowners often take 20 to 25 years to pay off their entire mortgage. This period, the length of time it takes to pay off your entire home, is known as the amortization. 

When shopping around for a mortgage, you will also hear lenders talking about the mortgage term. This refers to the length of time for which you are bound to a specific lender at a specific rate. The most common mortgage term is five years, but you can find mortgage terms ranging from one to ten years. The rate you pay will also vary by the term you choose. Once your mortgage term ends, you have to renew your mortgage, but you have the option to shop around and see if it is possible to find a lender with a lower rate.

Mortgage Rate

Your mortgage rate, or mortgage interest rate, refers to the amount of interest you will pay throughout the repayment of your mortgage. 

Of course, different lenders offer buyers different rates based on their unique circumstances. Always be careful when you sign on for a mortgage from a lender, and be sure to review the terms and conditions of your mortgage. If you’ve been offered a rate that seems too good to be true, then pay close attention to the fine print of your contract. There are countless stories of home buyers who receive contracts where the rates don’t line up with what they negotiated with their lender, so this is important.

One decision you will have to make is whether to choose a fixed rate mortgage or a variable rate mortgage. With a fixed rate, your mortgage interest rate will be locked in for the duration of your mortgage term; you know what to expect.

With a variable rate, your mortgage interest rate will fluctuate based on the prime rate on the market. The prime rate is a nationally determined rate set by Canada’s leading financial institutions each year to help direct lending practices. If the market is doing well and the prime rate lowers, you’ll pay less, but if the prime rate increases, you could end up paying significantly more; a variable rate carries greater risk. 

As an example, HSBC Canada, which offers some of the most competitive mortgage rate options on the market, currently has a special offer for a five-year fixed rate mortgage at 2.69%. The exact rate will depend on the specific circumstances of the buyer, and may change based on the down payment, amortization period, and other factors.

Economic forecasters are divided on whether or not homeowners should anticipate a rate hike in the coming years. So, do your research, assess your financial capabilities, consider the risk, and choose what works best for you.

Lenders

There are many different mortgage lenders available on the Canadian market. 

All of Canada’s major banks offer mortgage options, so many home buyers choose to work with one of these financial institutions. Due to their large presence in the market and their long-term credibility, Canada’s major banks are a trustworthy option for mortgage lenders, but there are other mortgage lenders with whom you may be able to find a good mortgage option.

Notably, many of Canada’s major banks offer mortgage lending programs for newcomers (usually requiring the 35 percent down payment, as discussed above). Some other lenders offer similar mortgage lending options for newcomers, but not all of them. If you are planning on buying a home within your first two years in Canada, one of your first questions for a lender should be whether or not you can qualify for a mortgage without an established Canadian credit history. 

Currently, Moving2Canada has partnered up with HSBC Canada to offer a great mortgage option for newcomers to Canada. HSBC is one of Canada’s leading banks, and offers mortgage lending options specifically for new immigrants looking to buy a home in Canada. At HSBC, you’ll be paired with a Mortgage Specialist with experience working with newcomers to Canada. HSBC offers competitive rates and exceptional service, plus you may be eligible to get up to $2,000 cash back. Find out if HSBC could be an option for you.

Maria Hasson, Moving2Canada’s Recruitment Consultant, chose HSBC when she purchased a new home in 2018. “They’re very good and personal,” Maria said of HSBC. “They had the best rates out there, so we had a very good experience." Maria herself is an immigrant to Canada, and is now happily living with her family in beautiful Vancouver, BC.

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Condos in Montreal often fuse Canadian technique with European-style. These red brick buildings are one type of common home in Montreal.

Buying a new home can be a daunting task, especially if you’re in a new country. But with these steps, you’ll be in a better position to get started.

Step 1: Figure out how much you can afford to spend on a home in Canada

Start out by using the affordability calculator tool from the Canada Mortgage and Housing Corporation (CMHC). The CMHC is a corporation owned by the Government of Canada with a mandate to help Canadians with the home buying process, so the CMHC affordability calculator is a reliable research tool for new home buyers.

Simply input your financial information, and the CMHC will determine the approximate maximum amount you can afford to spend on a home. Just remember that if you are planning to buy a new home in Canada within two years of arrival, you’ll likely have to pay a higher down payment, so be sure to factor that in when using the affordability calculator.

Step 2: Start looking for your new home in Canada

Once you’ve scoped out how much you can spend, you’re ready to start looking for a home!

In today’s market, the majority of real estate listings are online. A few of the top websites in Canada for finding a new home include Realtor, Purple Brick, and Property Guys. 

Many home buyers in Canada choose to work with a real estate agent when buying a home. Real estate agents often have industry knowledge and expertise that enables them to spot potential issues with prospective properties and to handle the negotiation process with sellers. If you don’t have a lot of real estate knowledge, working with an agent for all or some of the process might be a smart idea. However, remember that you will need to pay the agent a fee for their services.

However, many home buyers choose to go through the process without a real estate agent. If you feel confident in your knowledge of the industry, your ability to research your options, and negotiate on your own behalf, then you may not need a real estate agent. Be aware that there are risks involved in buying a home without a real estate agent. Do you know the types of inspections that need to be done prior to buying a home? Are you able to negotiate with a seller? Make sure you weigh the risks before choosing to home hunt without an agent.

Try your best to enjoy the hunt. This is your chance to look at homes and imagine the many possibilities for your life in Canada. Go view potential homes with your family and friends, and enjoy the experience of planning your future together.

Step 3: Make an offer on your new home in Canada

Once you find a home that you’re interested in, you’re ready to make an official offer. If you’re working with a real estate agent, they’ll help you to put together an official offer. If you’re doing this alone, consult the CMHC guidelines on making an official offer for a property.

Don’t be discouraged if your first offer isn’t accepted. Buying property in Canada is competitive, especially in certain areas (we’re looking at you, Vancouver!). If you stay committed to the process, you will find something.

Once your offer has been accepted and you’ve closed the deal, you’ll have to formalize your mortgage with a lender. 

We recommend working with HSBC Canada on your mortgage. Check out the HSBC mortgage program for newcomers to Canada to see if you qualify.

With an offer finalized, you’re ready to move in and get started on the next part of your journey in Canada. And, don’t forget to meet your neighbours! It’s Canada, everyone has their own story, and most people will be happy to share theirs and hear yours over a hot chocolate or a cold beer. 

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We’ve covered a few extra concepts that will take your Canadian mortgage knowledge to the next level. Check them out if you’re looking to become a mortgage expert:

Mortgage Insurance

Mortgage insurance, or mortgage default insurance, is a type of insurance that protects lenders against home buyers who cannot afford their mortgage payments. This insurance is provided by the Canada Mortgage and Housing Corporation (CMHC). CMHC charges an insurance premium to mortgage lenders, who almost always pass the cost onto you, the home buyer. 

Mortgage insurance is only required for certain types of mortgage loans. If you make a down payment of 20 percent or higher, usually you are not required to purchase mortgage default insurance. However, if you make a down payment of between 5 percent (the minimum down payment) and 19.99 percent, you should expect to add this cost onto your mortgage payments.

Mortgage Specialist

A mortgage specialist may refer to a mortgage expert employed by a specific lender in Canada or it could refer to an independent mortgage broker with no formal partnership with any specific lender. In both cases, mortgage specialists are professionals in the financial industry who have received training on mortgages and homeownership in Canada. If you are unfamiliar with Canadian mortgages, or if you just want an expert opinion, it is worthwhile to consult with a mortgage specialist during your process.

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