Newcomers often dream of buying a home in Canada someday. Property purchase requires a large financial commitment and the willingness to take on the responsibilities of a homeowner. In Mortgages 101: How to finance your first home in Canada, we outlined the details of financing your first home.
In this article, we will walk you through the process of buying a home in Canada and provide helpful tips and advice along the way.
Choosing between buying and renting
Many newcomers experience the dilemma of buying a home versus renting one. Here are some general pros and cons to help you decide:
Renting a home
|Buying a home|
If you’re considering renting a place, see How to rent your first home as a newcomer in Canada.
|Learn more about the process of renting and buying property in Canada by downloading the Housing Guide by Arrive. Whether you’re looking to find temporary accommodation for your first few weeks or if you’re looking for a more permanent, long-term option, this guide will provide resources, tips, and advice to ensure you are making the right decisions on housing for you and your family.|
6 steps to buy a home in Canada
1. Know your options: Decide on the type of house and neighbourhood
Before setting out on the journey of buying a home or a property, it’s important to understand the different types of residential housing that’s available in Canada and decide on the type of neighbourhood you hope to live in.
Generally speaking, you can buy a home in pre-construction, one that’s brand new and ready-to-move-in, or one that’s being resold. Pre-construction homes are typically cheaper than their resale or ready-built counterparts but do have their advantages and disadvantages. Working with a realtor and a lawyer will help you get a more realistic sense of some of the additional costs incurred.
Here are a few types of housing:
|Type||Independent house||Attached to another house on one side||Like an apartment, an independent unit with common areas and shared amenities||Independent unit with separate entrance, generally grouped as three to six units||Independent unit with separate entrance, typically reserved for two or three families|
|Land ownership||Yes||Yes||No||Varies; land ownership may be possible||No|
|Fixed monthly maintenance fee||No||No||Yes||No||No|
|Share a wall with neighbours||No||Yes, on one side only||Yes||Yes, on two sides||Yes|
|Number of storeys or floors||Single floor to two or three-storey||Two or three-storey||Multiple floors, usually high-rise or low-rise buildings||Two or three-storey||Two or three-storey|
|Access to amenities like gym, pool, guest suites, etc.||No||No||Yes||No||No|
Reflect on your needs (such as transportation and schools), lifestyle preferences, and budget while considering various neighbourhoods. You can choose between an urban or a suburban neighbourhood or even opt to live in a rural area or a smaller town or city.
For more insights into living in a smaller town or city, see Advantages and challenges of settling in a small Canadian city.
Outline your “needs” and “wants.” Classify all the must-have things that you cannot compromise on as needs and those that are good-to-have (but you can survive without) can be added as wants. Also, consider your budget and the variables (like location, parking spot, etc.) that you’re willing to give up to find a home that delights you.
2. Assess, organize, and plan your finances
Needless to say, buying a property or a home is a huge financial commitment, and so, it is essential to be well-prepared before you make the purchase. Being prepared involves –
- Assessing your annual household budget and income;
- Knowing your credit rating;
- Being pre-approved for a mortgage;
- Understanding all the one-time costs (such as down payment, legal fees, title insurance, inspection fees, property transfer, and taxes); and
- Being aware of recurring monthly costs (such as mortgage payments, utilities, maintenance, insurance premiums, and property taxes).
Read Mortgages 101: How to finance your first home in Canada to understand the basics of home financing, outline the hidden costs, and offer some budgeting tips and advice to help you buy a home.
|Whether you’re ready to buy a home or just starting to save for a down payment, RBC can help you feel settled faster.
Book an appointment with an RBC Advisor to speak with a mortgage specialist who can sit down with you one-on-one to help you make the right decision. Once you have your appointment booked, an advisor will reach out to check whether you’d like to meet via phone, video or in-branch.
3. Find a realtor/real estate agent
While house hunting, most people opt for a realtor or a real estate agent to find a suitable place. While choosing a realtor, it’s important to determine a good fit – find an agent you can trust. Choose a person who will be your advocate, personal advisor, consultant, and negotiator. With that said, note that having a realtor represent you is not mandatory, and you may choose to find a home without using one.
Here are a few parameters to consider while evaluating realtors: Whether they are licensed in the province, their experience, background, approach, confidence while answering questions, services offered, whether they work solo or in a team, communication style, references, and primary neighbourhoods they work in.
Advantages of using a realtor:
- No need to pay commissions to the realtor; commissions are paid by the seller – not the buyer. Note that the commission is indexed on the purchase cost.
- Realtors can offer a wealth of knowledge and experience from working in the field. They are aware of local trends, market values, legal clauses, and other crucial information and thus, are able to guide you in the right direction. Some realtors are able to flag potential issues with a home.
- Realtors can provide guidance on all documentation and handle the buying process from start to end. They can negotiate the purchase price and contract terms, such as date of possession, required repairs, included furnishings or equipment.
- Realtors can help evaluate if you are eligible for government homeownership incentive programs.
- Get access to authentic and genuine listings; less probability of getting scammed.
- Time-saving and stress-free.
4. Visit various properties to find one that you want to buy
Now that you’ve decided on the type of house, the neighbourhood(s), got your finances in order and teamed up with a realtor, it’s time to select some properties that fit your criteria.
When attending a showing, investigate the property thoroughly and ask questions. A few things you may want to check are: storage space, water pressure and plumbing, mould, ventilation, potential water damage or cracks on walls or ceilings, and the general condition of the property.
5. Make an offer
Found a property you like? The next step is to make an offer.
An offer is a formal, legal agreement to purchase a home and is legally binding once accepted by the seller. Offers can be conditional and depend on factors such as financing or a home inspection. If any of the conditions are not met, you can walk away, even if the seller has already accepted it. Alternatively, you can also make a firm offer with no conditions attached.
What goes into an offer on a house?
A formal offer typically includes:
- Your legal name, the name of the seller and the address of the property;
- The amount you’re offering to pay (the purchase price);
- A cheque with the deposit amount (the amount varies based on the home’s purchase price and the market);
- Any extra items you want included in the purchase (for example, window coverings);
- The date you want to take possession (closing day);
- A request for a current land survey;
- The date the offer expires (usually less than 48 hours); and
- Any other conditions that must be met before the contract is finalized (for example, a satisfactory home inspection).
Depending on the property you wish to buy, there could be room for negotiation. It’s worthwhile to know that negotiations aren’t just limited to the purchase price but can also extend to more favourable terms as part of your purchase agreement, such as repairs, inclusions, and a longer or shorter closing date.
On the flip side, if the property you’re eyeing is located in a prime area or has other interested buyers, it could result in a bidding war with each buyer trying to raise their offer over the asking price.
Hiring a home inspector
Before you formally close the purchase, you’ll want to hire an inspector to inspect your home for defects and overall condition. As you choose a home inspector, ensure your inspector is a member of a recognized professional organization.
An inspector will provide a written report summarizing the condition of your home pertaining to –
- Plumbing and electrical systems;
- Heating, ventilation, and air conditioning units;
- Visible insulation;
- Walls and ceilings;
- Floors and windows;
- Integrity of the foundation;
- Presence of lead paint, asbestos, mold, or pests (termites or mice); and
- Any outdated or dangerous wiring.
6. Close the purchase and move in
Once you receive the report from the inspector and decide to proceed with the purchase, you’ll need a real estate lawyer to protect your best interests. The lawyer will help review the contract and assist with the title transfer.
Your realtor and lawyer will complete most of the closing formalities and outline some action items for you. These may include finalizing the mortgage documents, ensuring your homeowner’s insurance is effective on your closing date, transfer of utilities, providing necessary cheques to seal the deal, and signing all the closing documents.
Upon completion of all formalities, it’s time for you to move in!
Tip: Using a comprehensive moving service like Movesnap can help you manage every aspect of your move – from updating your government IDs, to sourcing reputable movers and switching your utilities.
Finding your dream home can be a very exhausting process. One of the things that can help you stay at ease is having a clear idea of your wants and needs. There are hundreds and thousands of properties all across Canada. With support from your realtor, bank, home inspector, and lawyer, you will be able to find one that’s right for you.
Webinar: Finding your home in Canada
Join Shikha Bhuchar (Arrive), Li Koo (Realtor), Manish Garg (RBC Mortgage Specialist) and Maxime Gazeau (Senior Researcher) as they dig into housing in Canada.
Arrive is powered by RBC Ventures Inc, a subsidiary of Royal Bank of Canada. In collaboration with RBC, Arrive is dedicated to helping newcomers achieve their life, career, and financial goals in Canada. An important part of establishing your financial life in Canada is finding the right partner to invest in your financial success. RBC is the largest bank in Canada* and here to be your partner in all of your financial needs. RBC supports Arrive, and with a 150-year commitment to newcomer success in Canada, RBC goes the extra mile in support and funding to ensure that the Arrive newcomer platform is FREE to all. Working with RBC, Arrive can help you get your financial life in Canada started – right now. Learn about your banking options in Canada and be prepared. Click here to book an appointment with an advisor.
* Based on market capitalization
This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.