Buying a property in Canada
When you get to Canada you’re going to need somewhere to live. I would recommend arranging accommodation (whether that’s buying or renting) before you get there. It can get very cold. In order to purchase or rent a property in Canada you’ll need to transfer funds into the appropriate currency. Trusted currency trusted brokers can help with this. A good one to use is TorFX.
Although market prices have been rising (with the average resale house price being around $325,000) purchasing a property in Canada is a good investment and can be relatively simple. Bear in mind that property prices vary from province to province, and generally apartments are few and far between, often only located in the older, larger cities. The bulk of the Canadian property market is made up of houses.
There are no limitations on buying a property in Canada if you have a resident status. If you don’t apply to the government residency standards you can still buy property through opening a bank account and applying for a Canadian mortgage (though some restrictions may be applied). Remember to do the necessary research before buying a Canadian home and make sure you have access to your bank statements, tax returns and other personal documentation. If you do find your dream home you may have to act quickly.
Finding your Canadian home
Use any Canadian contacts you have and ask around, it’s much easier to get a realistic idea of a place through first hand report rather than through looking at pictures on google.
The Multiple Listing Service (MLS) is a repertory of all Canadian sale properties, kept up to date by real estate agents, and is a great place to start. Websites like Realtor or Househunting can give you some good, basic information, but this should be backed up with the advice of a professional. Engage a realtor who can do the legwork for you, tell you about the area and negotiate a good deal.
Read classifieds of local newspapers. These can often be found online.
Buying your house in Canada
The Golden Rule: Everything Must Be Put In Writing.
The first paper on the pile of buying your own property is the purchase offer, which real estate agents can help with. The offer should contain a proposed deadline for completion and a list of any items you would like the property to retain. It should also be conditional, make the offer subject to the house passing an inspection and the mortgage being secured. The offer must be signed.
A 10% deposit of the proposed price must be included in the offer and paid into escrow (a trusted account). This deposit will be lost if the offer is retracted.
Offer’s can be accepted, rejected or counteroffered. With a counteroffer any changes must be committed to paper, signed by the seller and returned to you.
An agreement must be put in the form of an Offer of Purchase and Sale. The price must be stated along with the deposit, date of completion and any other details. It is signed by both parties and then sent to a lawyer who will approve the document, releasing the deposit back to the seller. After conducting a property evaluation the lawyer will prepare a Statement of Adjustment, which confirms the selling price and amount still owing.
A certified cheque should be made to cover any outstanding payments. This should be made to the lawyer who then transfers the money to the seller, and registers the sale in your name. You will then be provided with the deed and new keys to the house.
Real estate fees are often between 3% and 7% of the property value, with the seller paying the realtor fee. A land transfer tax is applied to the sale of a property, provincially varying between 0.5% and 2% of the property value and a Goods and Service tax of 6% of the purchase price gets applied to real estate fees and new buildings. Whilst legal fees are negotiable, to an extent, various factors can lead to them reaching up to 10% of the property value.
Loans and mortgages
The method and requirements for mortgage application in Canada is the same as in many other countries and is relatively straight forward if you have all the necessary documentation in place. Bear in mind that you must use a Canadian mortgage broker, as foreign banks are prevented from lending mortgages.
Every application is considered case-by-case, although Canadian residents and first-time buyers do receive certain privileges. First-time home buyers, depending on the lender, can receive a mortgage covering 90-95% of the property. Alternately they can be provided with a $25,000 incentive to aid with the costs of building a home. This money is withdrawn from the Registered Retirement Savings Plan and is interest free for 15 years. Up to 65% of the purchase price will be covered for non-residents and residents get roughly 75%. The usual interest rate for long term mortgage loans is around 6%. After 15-25 years of monthly payments most Canadian home owners are able to pay off their mortgages.
In order to get a mortgage several documents will be needed for an evaluation: proof of income/employment, proof of liabilities, Social Insurance Number, account number, property information, lawyers contact details. After all documentation has been received mortgage approval normally takes a couple of days.
Unfortunately, owning a property is never a simple matter of a one of payment. There are day to day running costs that will have to be met. Taxes must be paid on a regular basis for example, and can get quite expensive.
Property Tax varies provincially but is annually levied by the local communities. The list of tax rates are drawn by the provincial assessment authority, and are based on an assessment of comparative property value. This tax can vary year on year depending on the property value. Generally it remains between 0.5% and 2.5% of the market value.
If your house and its contents get destroyed Property Insurance will cover the replacement based on the cost of rebuilding the property. Prices can vary significantly between insurers.
Obviously, once you have your dream house you’ll need to set up services and utilities. Often this will take a one off installation cost of $35 to $50. Electricity, water, gas and sewage will be charged additionally, with fuel bills being sent out monthly and water and sewage bills sent out quarterly. In remote locations it is possible that you will have a sceptic tank and a shared water supply.