Buying a home
in Canada

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Buying a home in Canada

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Dreaming of becoming a homeowner?

Buying a home is one of the most important transactions you’ll ever make. Being prepared will make the process easier and help you make informed choices.

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Building your down payment

Buying a home is a big project that requires careful financial planning. A minimum down payment of 5% is required to purchase a single-family home. A down payment is the portion of the price that is not financed by your mortgage.

Here are three savings vehicles with significant tax advantages which will help you maximize your down payment.

FHSA

First home savings account

You can save up to $8,000 per year, for a lifetime maximum of $40,000. Contributions to an FHSA reduce your taxable income and the returns they generate are not taxable upon withdrawal when used to purchase a first home.

What’s more, there is no withdrawal limit. All the returns generated in your FHSA can be used to purchase your property.

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RRSP

Registered retirement savings plan

Like the FHSA, contributions to a registered retirement savings plan (RRSP) can help increase your down payment while reducing your taxable income.

You can then take advantage of the Home Buyers’ Plan (HBP), which lets you withdraw up to $60,000 from your RRSP to help fund your first home. Withdrawals must, however, be repaid to your RRSP over the following 15 years, or will be taxed.

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TFSA

Tax-free savings account

The tax-free savings account (TFSA) lets you save money that grows tax-free and is not taxable upon withdrawal—making it an excellent option to round out your down payment.

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Tip

Like many Canadians, reducing your taxable income could make you eligible for a tax refund, which you can then reinvest to continue building a down payment.

A solution if you don’t have a 20% down payment

If your down payment is below 20%, your loan will have to be insured by a mortgage insurer such as the Canada Mortgage and Housing Corporation (CMHC). This insurance will cover the lender’s risk as regards the repayment of the loan. The cost of this insurance is financed through your mortgage.

To avoid having to pay for this additional insurance, combine savings vehicles to maximize your funds and reach the required 20% down payment.

Getting a mortgage

Becoming a first-time homeowner requires patience and energy. Choosing to work with a mortgage broker can help you through the process of obtaining a loan. They will guide you through the various steps of buying a property and help you choose the mortgage that’s right for you.

Documents required

To streamline their assessment of your file, your broker will require several documents. Here’s a non-exhaustive list of things to prepare ahead of your first meeting.

Your new property

Signed offer to purchase, information sheet, municipal and school tax account, your lawyer or notary’s contact information, etc.

Your job

Confirmation of employment (date of hire, gross salary and position), pay stub, etc.

Financial situation

Source of your down payment, list of assets and debts, void cheque, etc.

Mortgage options

Once you’ve chosen your mortgage lender, you’ll decide on the amortization period, term and interest rate of your loan.

Amortization period

The maximum timeframe to repay a mortgage is 25 years, but it can be extended to 30 years for first-time buyers purchasing a new build.

Terms

Terms may range from one to five years. Closed terms offer lower rates, while open terms, which are generally used for short-term loans, can be repaid without repayment charges, though at a higher rate.

Fixed rate or variable rate

A fixed rate guarantees that you will make the same regular payments over the full extent of the term. A variable rate, however, is adjusted based on changes to the key interest rate.

Protecting your estate

Your home is not only a place to live; it’s also a financial asset. By properly insuring yourself, you can maintain the value of your home as well as your lifestyle.

Protect your home

Home insurance protects your finances against the costs incurred from damage to your home and provides third-party liability coverage. In general, if you take out a mortgage to buy your home, your lender will require you to have home insurance.

When it comes to coverage, there are many different options available to you, including “specified perils” and “all perils” coverage (which covers most incidents that can damage your property).

Find out more about home insurance

Protect your lifestyle

Most lenders recommend that you take out mortgage insurance (term life insurance), which will cover some or all of your financial commitments in the event of premature death.

This type of insurance also provides optional financial coverage in the event of disability or critical illness, and will protect you for the duration of your loan. That way, you won’t have to worry about your property becoming a financial burden to your family or your lifestyle suffering as a result.

Find out more about mortgage insurance

Personalized service and advice

An advisor can help you make your plans a reality, offering the advice you need for your family’s financial wellbeing. You can meet them virtually or in person.

Buying a home
in Canada