Buying a home in Canada can be a daunting process, particularly for first-time home buyers. If you’re in the market for a property, we have put together the ultimate checklist of legal steps you need to know.
Buying a home in Canada: checklist
This is a comprehensive checklist of what you’ll need to do to buy a home in Canada, from the financial and tax obligations to finding your dream home. Here’s what you need to know.
1. Budget
To get a realistic indication of your price range, there are several financial considerations alongside the actual market value of a property. This will allow you to buy the home you want while also enjoying your desired lifestyle.
What must be included in the budget?
When planning to buy a home in Canada, you’ll need to factor in the following:
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Legal costs: These are paid on the closing day (when your home purchase is complete). The lawyer or notary will review all contracts before signing and ensure the property doesn't have a lien against it.
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Estate agency costs: If you go through an agency, you will be required to pay fees related to this.
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Land registration: Before the sale's closure, you'll be required to pay for the registration of your property's title under your name, which is a percentage of the purchase price. This is also referred to as land transfer tax, deed registration fee, tariff, or property transfer tax.
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Adjustment costs: The seller may be entitled to certain adjustments for which you will pay the credit amount. An example of this is where the seller has already paid the property tax on the home past the purchase closing date and is owed credit.
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Mortgage loan insurance: Where your down payment is less than 20 percent of the purchase price, you'll be required to take out mortgage insurance. This will protect the lender if you're ever unable to make your repayments.
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Mortgage life, critical illness, disability,, and employment insurance: This is an optional cost for the buyer and protects you if you're unable to make mortgage repayments because of a job loss, injury or disability, critical illness,, or death.
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Home inspection: As a buyer, you'll be required to pay an inspector who will check the home's overall structure, major systems,, and components, including electrical and plumbing systems, the foundation, and the roof.
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Home appraisal: Mortgage lenders might require an appraisal as part of the mortgage approval process. You'll be required to pay for a professional appraisal to determine the property's market value.
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Home insurance: This is a condition of getting a mortgage and will protect your home and contents against theft, loss, or damage.
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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.
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Maintenance and repair costs: If your new home is a 'fixer-upper', you'll need to budget for the repair costs involved in the purchase. It's also worth factoring in ongoing maintenance costs linked to homeownership.
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Moving costs: This includes costs for the furniture removal company or equipment hire and storage costs.
2. Credit score
If you’re looking to buy a house, it’s worth checking your credit score, as this is central to any mortgage application. The higher your credit score, the more likely your mortgage application will be approved and the better your chances of getting a more agreeable rate.
3. Down payment
Before looking at buying a home, it’s best to start a savings fund for a down payment that can go toward the cost of the home. The bigger your down payment, the better your chance of securing the home you desire.
4. Mortgage pre-approval
A pre-approved mortgage is beneficial for potential homebuyers in a number of ways:
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It shows sellers you are a serious buyer with financial backing.
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It places you in a better position to negotiate with sellers.
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It lets you know how much you can afford.
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It gives you an idea of your interest rate.
5. Mortgage options
Most buyers will require a mortgage to assist with financing a property's purchase, and there are many mortgage options available in Canada. You will first have to decide:
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Whether you want a mortgage with a fixed or variable interest rate.
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The mortgage term you’d like to commit to.
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How often you want to make your mortgage repayments.
And, when it comes to deciding on where to source your mortgage financing, there are typically two options available to you:
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Mortgage lenders – These institutions will lend you money directly such as banks and credit unions.
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Mortgage brokers – These institutions will source a lender for you and get paid a commission directly by the lender. They will attempt to find the best rate for you.
6. Tax credits for homebuyers
The Canadian government provides tax credits to certain home buyers, and the provincial/territorial governments also offer certain home-buying incentives. First-time homebuyers can receive a tax credit of up to $750 which goes a long way in offsetting many of the upfront costs.
There are also the GST (goods and services tax)/HST (harmonized sales tax) rebates on the sale of new homes.
7. House hunting
Whether you’re searching for homes online or working with a local real estate agency, you need to first decide what type of home you want. There are so many factors that need to be weighed in, rather than just the look of the home. Consider the location:
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Is it near transportation routes?
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Are there nearby shopping centres and restaurants?
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What are the schools like in the area (if you have or are considering a family)?
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Where is the nearest medical facility?
Why work with a real estate agent?
When buying a home in Canada, particularly if you're new to the region, it's certainly worth seeking input from a professional realtor who can provide valuable guidance that saves you time and hassle. Here are some of the reasons it's best to work with a reputable realtor.
Exclusive home access
Although most people will advertise their properties quite extensively, there are certain instances where the seller would prefer the sale of the home to be kept private. Because a realtor has extensive knowledge of the property market, they're most likely the first port of call for such sales, so by investing with the help of a realtor, you're more likely to come across some of the hidden gems of the real estate market.
Customized solution
Realtors will have intimate knowledge of their listings, so if you're looking for a particular type of home, you won't have to waste your time with endless viewings that leave you disappointed. A realtor will be able to point you in the right direction or act as your lookout for when that perfect property finally comes on the market.
Keen eye and support
Too many first-time buyers have been caught out by undetected issues that can become costly to fix. An experienced realtor will be able to point out any areas of concern, particularly when performing an appraisal for you. In addition to this, they can offer you beneficial guidance throughout the home buying process, all of which can be quite emotional and overwhelming. You can be confident that you're investing in a home that will bring you happiness for many years.
Negotiation
Once a realtor has done an appraisal, they can act as a negotiator between yourself and the seller, allowing you to negotiate the repairs of any issues or adjust the selling price accordingly. A realtor is unbiased and can navigate a level-headed negotiation that is more likely to draw a positive outcome.
Administrative assistance
There are endless paperwork and administrative necessities that need to be worked out before buying a home, and without a realtor, you can end up completely lost. Some of the documents you might encounter when buying a home include:
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Affidavit for title as well as seller’s affidavit;
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The written offer;
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The deed;
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The bill of sale; and
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Transfer tax declarations.
Many realtors will keep records of your property's purchase, which can be incredibly helpful down the road.
Big savings
Although you can undoubtedly go ahead and buy your own house without the assistance of a real estate agency, it might end up costing more than you'd expect. A realtor has extensive knowledge of the area and neighborhood and can quickly assess the market value of a house. This will ensure you're not overpaying for a property while also gaining useful insights on improving the property.
Bypass final hurdles
Sometimes the most challenging part of the home-buying process is the last few days, and it's seemingly minor issues that can cause a considerable amount of hassle. Some of the closing problems you might encounter are:
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Last-minute requests or changes;
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Mortgage delays; or
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Documentation errors or unclarity.
However, an experienced realtor will not only anticipate such challenges but will be able to sort them out quickly for you so that you’re able to buy a home in Canada with minimal fuss!
