Home Buying In Canada

It is often said that home buying is one of the most stressful times of your life and that is certainly no different in Canada.

The good news in Canada is that home buying is definitely easier than some countries (UK for instance). In general, the procedures are straight forward and normally are quickly dealt with.

We'll start with an overview of the different types of housing available and what each type is. Then we'll move onto the types of ownership and the responsibilities and rights you have with them. Moving down the page you'll find the Home Buying process described along with links to a great page on mortgages. Finishing off are sections on Insurance and what happens once you have taken possession.

Types of Houses

There are several different types of housing available:

Single Family - Basically a detached one or two storey building designed for a single family occupancy. One storey buildings are Bungalows. Most will have a basement as standard which may be developed (is finished to the same standard as the rest of the house). Normally these will cost more than multi family units and will generally be on an estate.

Duplex - This is essentially a semi-detached building. Again it can be one or more storeys either side by side or one above the other, but will have a common dividing wall.

Fourplex - Four apartments together in a block (2 up, 2 down). Normally rented can also be a Condo unit.

Townhouse - Similar to a Terrace, several two storey houses joined in a row, normally part of a Condo project.

Highrise Apartments - Multiple apartments(flats) in a single highrise building. Newer developments in the Cities are luxurious and expensive with excellent facilities though again are normally part of Condo projects.

Ownership

There are 2 main different types of property ownership - Freehold and Condominium.

Freehold - The same as most countries. The home and the land it is on are owned outright and - subject to certain laws, bylaws and codes - the owner can do whatever they want. When you purchase a freehold, the Lawyer will lead you through all the clauses and explain each in turn. You will also receive a copy of these legal documents for your future reference.

Condominium - This is definitely a North American style of ownership. Normally either apartments or townhouses are sold as condominiums and offer a low maintenance lifestyle in most cases. The apartment or house itself (unit) is owned outright and an equal share of communal areas - gardens, elevators, secure parking etc. A monthly "condo" fee is charged to maintain these communal areas and also build up a contingency fee.

All of this is managed by a legally established condominium corporation either made up of the residents or contracted out to a professional property manager.

Mortgages

As agreeing to the RIGHT mortage for YOU is such an important decision we have dedicated a complete page to the subject. So, please follow this link for all the information about Canadian Mortgages

Home Buying Process

The first step in the home buying process is to find out exactly what you can afford mortgage wise (see link above). In Canada, you will have to be pre-approved by the prospective lender who will issue a certificate showing how much you have been approved for. When you find the property of your dreams, you are then able to enter into negotiations straight away knowing that barring disasters, the financing is in place. One extra bonus is that the rate will be held for 3 months - unless they go down so it offers some protection as well!

Next on the list for home buying is to research where you want to live - its definitely worth enlisting the help of a Realtor for guidance. The seller pays all the fees involved with the realtors so its free advice to anyone who is looking to buy property. Basically, the selling commission is split in half. One half goes to the realtor who LISTS the property for sale, the second half is paid to the realtor who introduces the buyer. So if a Realtor sells one of his/her listings then they bank all the commission.

The Realtor will know what is on the market, if it is a fair asking price for the market conditions, show you around the homes on offer and help you when it comes to making a purchase offer. The purchase offer is a legally binding document which, even if conditional, needs to be taken seriously. Your Realtor is an expert to guide you through this part of the home buying process and ensure the correct conditions are put into the contract for your protection. You will have a limited time to lift the conditions (have the finance in place or carryout the property inspection for example) - once met, the contract becomes the final offer to purchase and you are committed.

We are able to recommend reputable realtors in Calgary, the Greater Vancouver Area/British Columbia and also Southern Ontario - with full relocation services available.

When we were home buying, our realtor sat with us and discussed the area and budget. He told us our options, drove us all around the town to show us the different areas and left us a list of houses in our range. When we had decided which we were interested in he made appointments and took us around the homes to view them. Eventually, we decided to build a new home - he handled the negotiations and we ended up with the home we had always wanted!

If you are looking to build or buy a new home you can deal directly with the builders representative. However, unless you know the "ins and outs" of the home buying process you may as well enlist a Realtor to help you out. Some builders reps may offer you a discount on the purchase price if you don't use a Realtor as then they won't have to split the commission. For a couple of thousand dollars it doesn't seem worth it to miss out on expert, unbiased advice acting in your interests to guide you to a reputable builder.

You will have the choice of floor plans or can have your own design custom built in the location of your choice. You will have to pay GST at a minimum of 3% (depending upon the value of the property) on the purchase and will have all the usual expense associated with a new house - landscaping, curtains etc. Also, most builders will give you an appliances "allowance " at a particular store. You choose your appliances at the builders discounted rate, if you want to pay more for a better model thats fine. You may also be able to buy other electrical items at the discounted rate as well - always ask!

Do ensure the builder is a part of the Provincial new homes warranty program for your own protection. You will have a standard 1 year builders warranty, followed by an additional 4 years cover from the new homes warranty (depends upon the Province you are in). This is normally extendable to 10 years total for a small fee. (We paid approximately $250.00). Being a member of the warranty program is vital for a builder to show their quality so normally they will not jeapordise this by poor workmanship or failing to honour warranties.

If you buy a new home you may be able to use the builder's lawyer free of charge to do the paperwork. They will always act for the builder in case of a dispute but this can save you money in normal circumstances though may not protect your best interests.

Otherwise, you will have to pay for your own lawyer to carry out the legal work involved in the home buying and to close the deal. You can easily find a lawyer or Law Firms by searching online who specialise in real estate. By the time the additional costs (searches/title registry etc.) and GST are added the fees may be several thousand dollars so check the price before you agree to use the Lawyer. Add to that the cost of a property inspection (if the house is preowned), which depending upon the size of the property may range between $300.00 - $500.00 to have carried out. Well worth the cost as it will give you a written report on the condition of any building and could save you a lot of expense later on.

Most lenders will make the mortgage offer subject to an appraisal on the property. This will be in addition to your own property inspection and should be a condition on your offer to buy to make sure the house is ok or to give you some negotiating leverage if you want one to restore. Remember, though the houses are well built, they are mainly wooden and perceptible to a whole host of problems that may be expensive to fix. For example, most roofs will need to be replaced every 20 years or so. Problems found several months after purchase can ruin your home buying experience.

So here is a simple summary of the Home Buying process:

1. Work out your Budget and apply for a mortgage preapproval - normally maximum lending monthly cost is around 40% of monthly income)

2. Find a Realtor you are comfortable with, make sure they are licensed and discuss your home buying wants/needs with them

3. With the Realtor, find the property that matches your requirements, carry out viewings, research the area, are the local schools good etc.

4. With the help of the Realtor make a conditional offer to purchase - standard conditions are subject to financing, subject to property inspection - your Realtor will advise. If the buyer accepts your offer and the conditions of sale you will both sign the document. There will be dates when the conditions have to be met by you to make the offer a final purchase - if the property fails the inspection then you have reason to either renegotiate the offer or withdraw your interest with no loss of deposit. This is a legally binding document so take it seriously as you will be required to place an agreed deposit down at the time of signing.

5. Once all the conditions have been met and you wish to proceed with the purchase then its over to the legal people who will carry out all the necessary checks and draw up the papers - both parties will agree on a date to officially hand over the possession of the property - known as closing day. This is the day that your mortgage lender forwards the amount you are lending, you pay the difference between the loan and the purchase price to your lawyer. Then the lawyers exchange the money for the keys etc and enters you as the new legal owner of the proerty. You will also have to pay the legal fees and all othger costs (disbursements) at this time.

6. The property is yours and you can arrange the move in Date!!! The home buying process is complete.

Insurance

Nearly all lenders will require some sort of life and buildings insurance on the property. You can take out a life policy that will pay off the mortgage balance in the event of one or both of the mortgagee's deaths. Another option is to take out an independant life policy for a fixed sum that will cover the mortgage balance and then leave some extra.

Buildings insurance is normally linked to contents cover as well and it definitely makes sense to have both. Why go through all the effort and stress of moving countries & home buying and then not adequately protect youself, family and belongings? Enough said!

Once You're In!

After the home buying is complete there are plenty of other processes to be completed.

The owner of each property is required to pay local property taxes either annually or monthly. This normally equates to approximately 1% of the assessed value (not market value) of the home. Do note that the property value may be different than the price you paid as it is set by the local council and assessed each year.

These taxes go directly to the local council and will pay for the local services (police, fire, ambulance etc.) and schooling. When you move in you will submit a form detailing which school board you want the money to go to. Contact your local council for exact details of what services are covered by their budget. Some areas have a monthly payment scheme that can be included with the mortgage payments - your lawyer and mortgage lender should discuss this option during the home buying process.

The household utilities will have to be changed over into your name - the builders rep or your realtor will be able to assist with contact details for these. These include cable/satellite tv, electrics, gas, phone, garbage collection, recycling, water supply and sewage.

Most services are now privatised so you should have some choice (unless you are in the wilderness!!). We had to pay a security deposit as we had no credit history with the electrical, gas and phone companies - we have since been reimbursed (after 12 months) by the electrical company. After about 6 months you should be able to enroll in a monthly budget plan if you want and some service providers may offer fixed rate contracts.

Your realtor should be able to provide an estimated cost of utilities for different sized properties to assist with any rough budgets you wish to calculate though we have provided an estimate of our monthly outgoings at the bottom of the page HERE.

The Canadian Mortgage and Housing Corporation is the Government of Canada's National Housing Agency. Their website offers comprehensive advice and downloadable guides on Home Buying in Canada - the Newcomers Guide To Canadian Housing is especially useful. If you are buying a Condo, check out the Condominium buyers guide - another great free resource by the experts!