“The strength of a nation derives from the integrity of a home.”
Newcomers are advised to bring letters from their landlords or banks when coming from their country of origin, to present to local Canadian landlords and banks. These documents can show that you have always paid your rent and/or always paid your mortgages. Any document to prove that a new immigrant is responsible and will pay rent will make renting/settling easier. Sometimes local landlords even require references.
In a market where in some provinces there is a shortage of rental accommodation, such documents will pose help for securing a home. Immigrants with no credit rating or rental references may find difficult to secure a rental property (or purchasing a home – more at ‘Buying a Home’).
Past newcomers have offered to pay one year’s rent in advance – such offers were refused because the applicants were not employed. Therefore it is also advisable to find employment (even if the wage is low and not in your field) as soon as possible in order make it easier to rent a house or apartment.
Immigrants, foreign workers and students are advised to familiarize themselves with provincial legislation about renting, each province has its specifics:
- Alberta: https://www.landlordandtenant.org/
- British Columbia: https://www2.gov.bc.ca/gov/content/housing-tenancy/residential-tenancies/starting-a-tenancy/tenancy-agreements
- New Brunswick: https://www2.gnb.ca/content/gnb/en/services/services_renderer.637.Landlord_and_Tenant_Services_.html
- Nova Scotia: https://beta.novascotia.ca/residential-tenancy-forms
- Ontario: https://www.ontario.ca/page/guide-ontarios-standard-lease-newcomers
- PEI: http://www.irac.pe.ca/rental/document.asp?f=rental-agreements.asp
- Saskatchewan: https://www.saskatchewan.ca/residents/housing-and-renting/renting-and-leasing/tenancy-agreements
Buying A Home
Having ‘a place to call your own’ will certainly provide you and your family with a secure platform from which you can negotiate the lifestyle adjustments that challenge most immigrants upon arriving in Canada. As in most first world countries, property is an extremely valuable and stable investment. In Canada, the property market has had sustained growth over many decades.
The process of buying a home may appear daunting at first, but fear not – with the right advice you won’t be investing money in somebody else’s property (renting) for very long. If you make use of the following services the ride will be a lot less bumpy!
Mortgage Specialists are paid by Lending Institutions and do not charge fees for standard mortgage applications. In the event you do not qualify for a mortgage during your first 12 months in Canada, Mortgage Specialists will strategize with you on how best to establish lending eligibility as quick as possible. They will also discuss mortgage products if you have the funds to make a sizeable down payment. Whatever means of finance you choose, consider there are approximately 60 Lending Institutions in Canada, each with their own specific product. Consult someone who is able to understand your needs and provide you with the most appropriate product.
It is worth noting that mortgages in Canada typically carry a term of 5 years or less, and are renewed prior to or at the expiry of each term. This renewal process is an excellent opportunity to renegotiate your mortgage via your broker with several lenders who will compete for your business, ensuring the best possible product to suit your needs. As per the Credit History section, if you wish to “shop-around” for the best rates, it is advisable to do so through a broker so as not to affect the credit score you have worked so tirelessly to establish!! (See the Credit History section for further details on cons of shopping around yourself.)
For an immigrant, the immediate barrier to purchasing a home is the ability to qualify for a mortgage. Being new in Canada you will not have had an opportunity to establish a Credit History (see this titled section in A-Z of Immigration) which is the primary qualification criteria used by most Banks and Lending Institutions to establish the risk level of a “Borrower”.
A Mortgage Specialist / Broker however has access to lending programs catering specifically to immigrants in their first 12 months of residence, which may qualify you for a Mortgage at competitive rates without a Credit History and only a 10% down payment. The Mortgage Specialist will be able to quickly assess your eligibility and handle all aspects of the application process.
A realtor specializes in assisting in the buying and selling of homes. Realtors are paid on commission; it is in their best interest to find you what you are looking for. As in any industry there are good and bad Realtors. The only safe way to distinguish between them is their track record. Ask your friends or family to direct you to a realtor with a good reputation rather than using the one who charges the smallest commission.
If you have no way of being referred to a realtor you should ask your Mortgage Specialist for an experienced recommendation. Typically you pay for the service you get! Realtors tend to operate in specific geographic areas; it is advisable to use different realtors if you are considering properties in different areas.
Buying an existing home generally unfolds as follows. The key is to deal with professionals, as with any significant investment.
- Establish how much you are able to spend on a home (Use a Mortgage Specialist / Broker)
- Meet with a Mortgage Specialist to establish your lending eligibility
- Establish risk profile and discuss various lenders and their product features.
- Obtain Mortgage ‘pre-approval’ commitment in order to verify purchasing ability and to secure a rate hold from the lender (typically for 90 days)
- Choosing the home you would like (use a Realtor – known in many G7 countries as an Estate Agent).
- Meet with the Realtor/s and produce the ‘pre-approval’ commitment. This indicates that you are serious about purchasing and are not just ‘window shopping’.
- Take the time to view an appropriate number of listed homes, as the style of housing construction and neighbourhood conditions will be different to what you are used to.
- Once you have chosen a home the Realtor will draw up an ‘Offer to Purchase’ contract. The negotiation process in Canada is formal and regulated therefore you need to be guided by a qualified Realtor.
- Acceptance of an offer on a property will typically be conditional upon final approval of finance and a house inspection. Some sort of deposit is usually paid to the current owners and held in trust by the realtor’s company.
- The money for the purchase is secured and a solicitor registers the mortgage and transfers the funds.
- A full mortgage application is submitted. All supporting documentation, including financial records and details of the property being purchased must be submitted at least 2 weeks prior to closing date (preferably sooner).
- On the ‘closing day’ all legal documents have to be signed in person; funds are transferred and keys are handed over to the new property owner. It is important to retain a local solicitor to avoid unforeseen traffic delays etc.
Should I Purchase a New Home or an Existing Home?
The number of new homes being constructed in Canada each year is astounding. Consider Mississauga, just one of the cities in the sprawling Greater Toronto Area with a population of approximately 650,000. In 1991 the number of constructed ‘dwellings’ was just under 150,000 but during the next 10 years a booming economy and various demographic factors fuelled the construction of a staggering 45,000 new ‘dwellings’. Even with the recent slowdown in the economy, the high demand for housing and record low interest rates continue to drive the construction of new settlements that reach deeper and deeper into once tranquil agricultural land.
One of the biggest selling features of a ‘new home’ (generally still in the building stage) is that the initial down payment can be spread out, sometimes over a period of up to 1 year. The lures of ‘upgrades’ make some deals sound almost too good to be true – a high degree of caution should always be exercised by prospective home owners.
There are a number of positive and negative factors to consider if purchasing a new construction. Professional advice from a realtor, mortgage specialist or lawyer should definitely be sought before signing ‘an agreement to purchase’ with any building company.
Consider the following elements carefully:
Typically the new home in question has not yet been constructed and your decision to purchase is being influenced by a ‘model’ home that always represents the high-end development, with every available “upgrade”.
Once your deposit has been paid the builder has absolute right to delay the occupancy time at his discretion. The building period is influenced tremendously by many unpredictable factors, the biggest one being the weather. Extended winters can delay construction by 3 – 4 months, during which time your temporary accommodation arrangements will need to be renegotiated.
Finance eligibility is determined within an economic climate that may have changed drastically by your occupancy date. Despite a rise in interest rates or termination of your employment, you will still have a contractual commitment to purchasing the property.
Such factors can be catered for in the sale agreement with the builder who will inevitably superior bargaining power in any negotiations.
The construction of the actual residence will be completed well before some of the other ‘peripheries’ are in place. Depending on a variety of factors there may be no grass or trees planted in the neighbourhood for up to 1 year. The roads may take equally long to tar and the result of both is that overall living conditions can be extremely ‘dusty’ or ‘muddy’ depending on the weather. Staggered occupancy dates often mean that many houses in the complex are still under construction after you have moved in.
New homes take time to ‘settle’ and often any renovations you would like to undertake to enhance the value of your investment have to be delayed up to 3 years.
Advantages to purchasing a new home might include the following:
You are able to customize your home to a certain extent and are therefore able to purchase a home that closely fits your particular preferences.
The increase in the value of any residential property is typically most significant during the first 5 years following completion. Assuming that the construction and location of the house is sound, you will often reap financial rewards should you endure the initial discomforts of a new house.
New home’s typically have unfinished basements and the renovation of this additional living space is one of the most popular means of significantly increasing the value of a residential property.
The construction is guaranteed for a significant period following occupancy and therefore you generally will not have any “surprises” that were undisclosed by previous owners in an existing home.
The golden rule of seeking advice from an independent professional holds true for the purchase of existing homes and a new construction. Competition always produces the best results for the consumer so be sure to make a market comparison before accepting an offer from either a builder or a lender.
Prospective purchasers of real estate are advised to first rent and get to know the area before buying. Do some research before signing a mortgage – there is a lot of competition between banks. Some of the websites below might be useful in getting to know the market. Join a discussion group and learn from other consumers and first home buyers.
Research before buying!