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February 27, 2023 | Buying
Financing a Home in Canada For Newcomers
A growing country, Canada welcomes an abundance of newcomers every year. As real estate agents in our nation’s bustling capital, we’ve worked closely with relocators from around the world.
In addition to being an amazing place to call home, owning real estate in Ottawa (or anywhere else in Canada) makes a smart investment – one that can provide financial security down the line. For new Canadians looking to buy a home, securing a mortgage is an important step in the process.
The good news is that financing a home in Canada is fairly straightforward. For relocators, there are even certain incentives and perks that can make the process easier. That said, there are also a number of important details you will want to know in advance in order to make the financing process smoother.
Who Can Buy a Home in Canada?
As of January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act has officially taken effect. While this will impact the purchasing eligibility of some relocators, there are a few notable exceptions that will allow others to buy property in Canada. Before proceeding with your home-buying journey, speak to an immigration lawyer who can confirm if this legislation may impact your plans.
Moving to Canada? Be sure to confirm your eligibility to purchase residential real estate under the Prohibition on the Purchase of Residential Property by Non-Canadians Act. We put together a helpful list of questions to ask your real estate agent ahead of your relocation. Click here to read.
Rather than a one-size-fits-all process, the steps of obtaining a mortgage will depend on your personal circumstances. Depending on how long you’ve been in Canada, whether or not you’re a permanent resident, and what your Canadian credit history looks like, your path toward home financing may differ from other relocators.
The good news is that many lenders offer specialized financing pathways for new Canadians. Sometimes known as a newcomer’s mortgage, these programs are designed to make it easier for relocators to get approved for financing by reducing certain barriers and requirements.
For instance, certain lenders allow new Canadians to obtain a mortgage despite having no Canadian credit history. Others may bypass or loosen requirements for previous employment in Canada.
Note: Every lender is different. Some may offer more or fewer leniencies than others. If you’re unsure where to find the best lender for you, ask a local real estate professional. As an industry insider, they can recommend a lender or broker who will help you take advantage of as many incentives as possible.
New to Ottawa? Check out these blog posts to explore our city’s wide range of neighbourhoods and communities.
- 5 Reasons Millennials Love Manotick
- Rural vs Suburban Living – Which is Right For You?
- Our Community Guides
Variable-Rate or Fixed?
In Canada, most home buyers choose one of two types of interest rates for their mortgages: variable-rate or fixed-rate. While both mortgage types have their advantages, it’s important to understand the distinctions between the two before making a decision.
A fixed-rate mortgage means that your interest rate will remain the same throughout the term of your mortgage. If you obtain a variable-rate mortgage, your rate of interest will fluctuate throughout the term.
Your lender can help you make the right decision based on your financial situation and long-term goals.
Rebates & Incentives
In addition to specialized mortgage programs, there are other government initiatives that can impact relocators who are looking to buy a home. In some cases, newcomers may even be able to purchase a home with a downpayment as small as 5%*. However, this is once again based on the unique circumstances of the buyer and the home itself. If you’re new to Canada and buying your first home, you may also be eligible for a land transfer tax rebate, which can help you reduce the costs of closing your home purchase.
* A downpayment of 5% is limited to homes priced under $500,000. Based on your credit history (or lack thereof) the required minimum downpayment could be as high as 35%.
Buying real estate for the first time? Check out these blog posts for tips that can help you find success in Ottawa’s housing market.
- Buying Your First Home? Read This First
- 7 Reasons to Consider Buying a Pre-Construction Home
- Navigating Ottawa’s Housing Market
Getting Started & Building a Budget
Like any major purchase, buying a home in Canada starts with creating a strong financial plan. A simple way to create a guideline for your home-buying budget is by getting pre-approved for a Canadian mortgage. During this process, your lender will examine your personal finances to determine that you qualify, and what you can afford by analyzing your savings, income, and any existing debt you may have.
Once you’ve received pre-approval, you will have helpful financial borders that will make your home search easier and more efficient.
Relocating to Ottawa? For decades our team has proudly served local buyers and can help you find your dream home. Send us an email or call 613-692-0606 to get started.