Economy

How to Buy a home in Canada

Published

3 years ago

June 10, 2021

Homeownership can be very exciting, but it isn’t always the best thing for everyone. Before you decide to buy a home, make sure you carefully consider the costs.

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.

Use CMHC’s step-by-step guide to help you decide if homeownership is right for you.

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.

Use the Financial Goal Calculator to help you determine how long it will take you to reach your savings goals.

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.

Find out about TFSAs.

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.

Find out about RRSPs.

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.

Learn more on how to participate in the Home Buyers’ Plan.

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.

Learn more about setting savings and investments goals.

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.

Find out how much of a down payment you need to purchase a home.

Mortgage process

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

Check your credit report before you apply for a mortgage

A potential lender considers your credit history before they decide whether or not to approve your mortgage application.

Before you start shopping around for a mortgage:

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.

Find a local certified mortgage broker with Mortgage Professionals Canada.

Find out about getting pre-approved and qualified for a mortgage.

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

Find a mortgage that is right for you.

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.

Learn more about optional mortgage insurance products.

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.

Find out if you’re eligible for the Home buyers’amount.

GST/HST housing rebates

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

Learn more about the GST/HST housing rebates that may be available to you.

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.

Find out if you’re eligible to claim moving expenses.

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. You can expect to spend between 1.5% and 4% of the home’s purchase price on closing costs. You usually pay these costs by the time the sale is completed or “closes”.

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.

Learn more about how home insurance works and the different types that are available.

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/HST

Generally, if you buy a new build home, you pay GST or HST. Some builders include the HST in their sale price while others don’t. Make sure to check. Otherwise, you have to pay this cost upfront on closing day.

Other closing costs

Other closing costs may include:

interest adjustments (period between your purchase date and your first mortgage payment)
Certificate of Location cost
estoppel certificate (for condominium units)
township or municipal levies (may apply to new homes in subdivisions)
mortgage default insurance premium (if paying premium up front instead of adding it to mortgage loan)
provincial sales tax on premiums for mortgage default insurance (applicable in some provinces)

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.

For more information on the appraisal process, read the guide from the Appraisal Institute of Canada.

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.

Use tips from the Office of Consumer Affairs to find an inspector and learn about home inspections.

Moving costs

Before moving in, you may also have to pay for:

moving costs
storage costs
real estate costs for selling your home (if applicable)
redirecting mail

Find out what to consider when choosing a moving company, and how to plan for moving day costs.

Once you move in, you may immediately face other costs, including:

utility hook-up fees
basic furniture and appliances
painting and cleaning
water tests
septic tank tests (if applicable)

Use this home purchase cost estimate form to estimate your home-buying costs.

Working with a real estate agent

Using a realtor is optional. A realtor typically searches for homes, negotiates a purchase price, fills out and file paperwork, and more.

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

Learn more about a realtor’s involvement in the home-buying process.

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.

There are pros and cons to owning a condo. For example, 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.

Learn about condo fees and other ongoing costs of maintaining a home.

Use this Condominium Buyers Guide for tips on what to consider before buying.

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.

Find out how to calculate your rental income and which expenses you can deduct.

Source: Financial Consumer Agency of Canada

Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

Published

4 days ago

November 8, 2024

Anne Joseph

OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

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Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

Published

6 days ago

November 6, 2024

Anne Joseph

The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Economy

Trump’s victory sparks concerns over ripple effect on Canadian economy

Published

6 days ago

November 6, 2024

Anne Joseph

As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

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