Buying a home in Canada

The essentials

Down payment

5% on the first portion of the price, more above it

Below 20% you must carry CMHC or private mortgage default insurance

Paid on acceptance

Deposit, commonly around 5%

Held in the brokerage's trust account and credited at closing

Government charge

Land transfer tax by province, plus a municipal one in Toronto

First-time buyer rebates exist in several provinces

Who does the legal work

A real estate lawyer; a notary in Quebec and often in BC

Binding at

Acceptance, subject to conditions

Closing

Commonly 30 to 90 days

The steps, in order

1. 1Get pre-approved and pass the stress testFederally regulated lenders qualify you at a rate above your contract rate, so your approval is smaller than your payment would suggest.
2. 2Make an offer with conditionsFinancing, home inspection, and for a condominium a review of the status certificate. In hot markets buyers drop these, which is exactly when they matter.
3. 3InspectA home inspection is not mandatory and not regulated everywhere. Choose the inspector yourself rather than the one the agent suggests.
4. 4Review the status certificate if it is a condoReserve fund, special assessments, rules, litigation and the corporation's finances. Your lawyer reads it, and there is a deadline.
5. 5Waive conditions and firm upOnce conditions are waived the deal is firm and the deposit is at risk if you cannot complete.
6. 6Close through your lawyerTitle search, title insurance, land transfer tax, adjustments and registration all happen here.

The stress test

Federally regulated lenders must qualify borrowers at the higher of a benchmark rate or the contract rate plus two percentage points. It applies to insured and uninsured mortgages and is the single biggest constraint on what most buyers can borrow.

Mortgage default insurance

With less than twenty per cent down you must carry insurance from CMHC, Sagen or Canada Guaranty. It protects the lender, not you, and the premium is usually added to the loan. There are limits on the price of a home that can be insured at all.

Condominiums and the status certificate

The status certificate is the condo equivalent of a health check: reserve fund balance, planned major work, any special assessment, the declaration and rules, and whether the corporation is in litigation. An underfunded reserve is a special assessment waiting to arrive.

Land transfer tax and what else closing costs

Ontario, British Columbia and most provinces levy a land transfer tax on the buyer, and Toronto adds a municipal one on top. Alberta and Saskatchewan charge smaller registration fees instead. Add legal fees, title insurance, adjustments and, on a new build, GST or HST.

Foreign buyers and additional taxes

A federal prohibition on residential purchases by non-Canadians has been in force with exemptions, and British Columbia and Ontario levy additional taxes on foreign buyers. Check what applies to your situation before you offer.

What to watch for

The things that cost Canadian buyers money, in the order they tend to be discovered too late.

Where these figures come from

• CMHC - buying a home
• Financial Consumer Agency of Canada - mortgages
• OSFI - residential mortgage underwriting (B-20)

Information, not legal advice. Rules differ by state, province and territory, and change. Confirm with a qualified professional in Canada before acting. TrueBuy’s document review and price estimates currently cover Australian property only.