Are you ready for homeownership?

What you'll learn:

• The pros and cons of renting
• The pros and cons of owning a home
• How to choose the best option for you

Receiving the keys to your dream home is a lifelong goal for many Canadians. For others, renting a home or condo is a preferable, lower-commitment alternative. Both owning and renting come with their own set of pros and cons, so let’s take a look to see which option is right for you.

With market prices in constant fluctuation, you’re probably one of the thousands of Canadians asking yourself whether it’s better to rent or buy. The answer to that question depends on multiple factors, including where you plan to live, your financial stability and your long-term goals.

Although renting is often seen as uneconomical, there are many circumstances where it may be a better idea to rent than to buy. For example, if you’re planning to make a move in the next five years or you haven’t yet saved enough for a down payment, renting may be a preferable option to owning—at least until you’ve settled down and built up your savings.

Understanding the unique set of benefits that renting offers—such as flexibility in relocation, less unexpected expenses and community—will help you carefully assess whether it’s the right choice for you. Here is a list of the major pros of renting a property.

The pros of renting:

• Fewer upfront and ongoing costs, and a more predictable expense

Renting is generally considered a safer option than buying, since it comes with less upfront and ongoing costs. Let’s say you’re a new graduate with student loans and minimal savings. Paying less on housing could help you keep to your budget and plan all your spending ahead of time, as renting expenses are often more predictable.

In order to move into a rental unit, your upfront costs usually consist of first and last month’s rent, in addition to the ongoing costs of monthly rent, utility bills and tenant insurance. Once you’ve signed a lease, your agreed upon amount of rent typically doesn’t change until your lease period ends. Note, other expenses may vary slightly. Utility bills, for example, change marginally depending on your usage.

• Ability to focus your money on other investments

The full expenses of renting may be cheaper than paying a mortgage, depending on your lifestyle, the city you live in and the amenities around you. If your goal is to pay off debt or save for a down payment, paying less money on housing every month could allow you to achieve these goals sooner or put more money toward a savings fund. Also, spending less on housing would allow you to spend your money on other things, such as travel and other enjoyable experiences.

• Flexibility in relocating and less commitment

If you’re someone who can’t live without your twice-a-year travel adventures or you simply aren’t ready to settle down somewhere for the next five years, renting may be a great option for you. Even if you don’t travel frequently, renting could offer you a trial period to explore various neighbourhoods, districts and even cities—without necessarily tying yourself down to a certain place for an extended period of time.

Unlike a mortgage, renting is not a long-term financial commitment. When renting, you’re free to relocate once the period of your rental agreement ends, and most leases last approximately 12 months. In contrast, it can take decades to pay off your mortgage completely. Plus, if you need to break the mortgage or sell the property, you could end up paying extra fees and penalties.

• Community and amenities

Renting a condominium or apartment may come with access to amenities such as guest rooms, theatre and community rooms, exercise rooms, saunas, and underground parking. For example, if your building includes a gym, the cost of using it may be included in your monthly fees, which means you won’t have to pay to exercise at your local fitness centre.

Compared to a stand-alone house, renting out an apartment or condo suite can provide a built-in community with constant opportunities to socialize. Apartments and condominiums typically advertise social events in their shared spaces and encourage friendly get-togethers. Meeting people may be as simple as reading the bulletin board in your condo’s elevator to discover any group activities happening nearby. In a shared building, you can get to know your neighbours just by running into them in the hallway.

Residential homes, on the other hand, are often far-apart and spread out, with suburban layouts that are less conducive to meeting people. While forming authentic connections is certainly possible as a homeowner too, it may require more initiative and active community-forming on your part.

• Less time spent on maintenance

Leaky faucet? No problem—just call your landlord. The landlord is responsible for providing and maintaining a residential complex in a liveable condition. In Ontario, for example, maintenance and repair fall under the landlord’s responsibility, including any upkeep related to heating, plumbing, electricity, and appliances that come with the apartment.

General upkeep can be a daily and time-consuming effort, since maintenance tasks can require a large chunk of your money and energy, and reduce the time you can spend on leisure activities and productive work. Instead, renting a property transfers the maintenance responsibility to your landlord, saving you the trouble of making repairs yourself, doing any heavy lifting, or having to contact a handyman.

The cons of renting:

In general, the average price of rent in Canada has increased and continues to climb, which may make it more difficult to afford a rental property, or save money while renting. One way to deal with the steady incline of rent is to get creative with your budget and monitor how much of your income goes towards rent. A helpful “rule of thumb” is to avoid spending more than 25%–30% of your income on rental expenses (including wi-fi and utilities).

Ultimately, whether or not renting the right choice for you depends on your individual circumstance. For example, renting may not be the best option if you’re looking to settle down in a place that you can redecorate, redesign and truly make feel like home. From the lack of opportunity for capital gain to continuous rent increases, renting has its own set of cons to consider before signing off on a lease, such as:

• No ownership

Not owning a property may mean there’s less flexibility in the ways you can make it feel like yours. For example, you may be prohibited from repainting your bedroom walls or planting a garden in your backyard to grow your own food. Before making any changes to the property, you may need to receive prior approval from your landlord or property manager. Renting also means that you won’t receive any capital gain from the property if its value increases over time.

• The price of renting can change

Since rental agreements only last for a specific amount of time, the amount you pay while renting may increase each time your lease is up for renewal. To manage rent increases, some buildings have rent control in place, which determines whether or not your landlord can increase the rent, and how much they can increase it by. However, if your unit is not rent-controlled (depending on the property and province), your landlord can increase the rent significantly each time the lease ends. If you’re unable to adjust to the new rent price, you might have to look for a new place to live.

• Renters must abide by the lease or rental contract

As a tenant, you agree to abide by the rules listed in your lease or rental agreement. This means that if your landlord doesn’t allow pets, you may have to limit your furry interactions to visits at the nearby animal shelter. Also, many landlords have strict rules about remodeling and don’t allow any repainting or redesigning in the suite. Plus, while the average rental period of twelve months is short compared to a mortgage, it can feel like a long time—particularly if you’re unhappy with where you’re living.

• Renters may be more dependent on landlords/neighbours/building management

If you have a maintenance request, such as a clogged dishwasher, you might need to rely on your landlord to fix it in a timely manner. Or, if you live in an apartment building or a close-knit duplex unit with next door neighbours and thin apartment walls, you may rely on your neighbours to maintain reasonable noise levels. Even with quiet neighbours, you may still have to depend on your sleep mask and ear muffs to get some quality sleep. Ultimately, having a positive experience in an apartment or condominium building depends on your relationship with your landlord and your neighbours as well as other factors that you may or may not be within your control.

Although owning a home may seem like a distant dream, it may not actually be an unattainable goal. Perhaps you’re looking for a larger property to raise children in, or you’re simply hoping to put down some roots in a place you love. In both situations, home ownership may be a great option for you.

The pros of owning:

From being able to remodel and renovate as you please to receiving capital gains, there are many benefits to purchasing your own property. Here are five of the main pros of laying down roots and purchasing your own place:

• The cost of a mortgage can be fixed

In the case of a fixed mortgage rate, the cost of your mortgage remains consistent for the term of the mortgage—which could last years. On the other hand, when renting, the amount of rent you pay each month can increase annually, depending on the province and property.

• Opportunity to build up equity

Building equity is a huge pro of homeownership. Over time, your home can become a significant asset that you can take advantage of in case of any financial need. Home equity refers to the dollar amount of your home that you own, or, the difference between your home’s total value and the amount you owe on your mortgage. Building equity raises the amount of money you have in your home and can occur when the property value goes up, or when the debt amount lowers. Unlike renting where the money you pay each month goes to your landlord, parts of your mortgage payments contribute to your equity, and help create a valuable asset that you can use for any future financial need.

Building equity can allow you to:

• Sell your home for more than you owe and make a profit
• Borrow against your equity with a home equity loan or home equity line of credit (HELOC) to pay off other debt, make investments or make a down payment on another home

• No dependency on landlords/neighbours/building management

Although renting has its own set of charms, it typically requires you to depend on other people to a certain degree. Your experience in a rental apartment or condo can depend on whether or not your landlord is reliable and responsive to your needs, and if they make repairs within a reasonable timeframe.

On the flip side, purchasing a property involves more responsibility and independence. Since maintenance depends on you, tasks can be done as late or as early as you are able to get to them. You no longer have to worry about avoiding rent increases, eviction or moving out if your landlord decides to sell the property. Truly owning the space means you can rest assured that your monthly mortgage payments are going towards your equity and working in your own favour.

• Flexibility to rebuild, redecorate and remodel

Ownership usually means you’re free to redecorate and remodel to your heart’s desire. Want to build a cozy reading nook in your bedroom? Prefer a different colour of tiles in your bathroom? All yours. Unlike renting, owning the property means you have the right to rebuild, renovate and remodel it. Note, some areas or neighbourhoods do restrict the changes that can be made to a property or prohibit certain types of exterior remodelling. This may happen when purchasing a home within a planned community or homeowner’s association.

• Potential for rental income

Owning the property not only gives you the flexibility to make any changes you see fit, but to use the property to help make extra income. Renting out a section of your property (or all of it) could be an opportunity to receive some extra monthly cash flow. For example, you could rent out a room in your property and use the monthly rental income to invest in the stock market, create an emergency fund or pay down any personal debt.

When thinking about renting and owning, it might help to consider renting as a form of flexibility, while home ownership may be a preferred choice if you’re looking for stability. Specifically, owning a home allows you the independence and freedom to make your own decisions about the property. With owning you can redecorate and make permanent renovations, and you’re no longer dependent on a landlord, neighbour or property manager.

That said, owning your own property has its own set of cons. It’s a serious, long-term commitment that may obligate you to stay put. In order to decide whether purchasing a property is right for you, you’ll need to carefully consider the following cons of ownership.

The cons of owning:

• Maintenance and repair expenses

Although you may be able to claim a portion of repair expenses while renting, owning a property means that the costly repairs and maintenance expenses fall on you. Property maintenance may include plumbing, replacing doors and windows, fixing the roof in case of a hailstorm, installing or replacing the garage door, repainting the exterior, and other expenses. Setting aside a budget for repairs is a great way to prepare for any potential costs.

• Long-term commitment

Owning a home or a condominium can be an attractive financial investment since the property’s value may appreciate after some time. Appreciation–not to be confused with home equity—refers to the increased value of your home over time. Although the physical structure of a home depreciates after a while, the land itself generally goes up in value, and the property’s location (and whether there are any surrounding neighbourhoods, parks, nearby schools, etc) is also taken into account when factoring the property’s appreciation.

The housing market in Canada is always changing, which means the value of your property may not increase substantially until you’ve lived there for many years.

Unless you “port” or transfer your mortgage to another property, purchasing a home is typically a long-term commitment that may tie you down to a place for an extended period of time. Committing to mortgage payments, homeowner’s insurance and other ongoing expenses may be well worth it in the long run, but only if your long-term goals are in line with homeownership.

• Time spent on maintenance (repairs, snow removal, basement renovations, painting, plumbing, building furniture)

Owning a property could require you to spend a significant amount of time on maintenance. Prior to purchasing a home, you’ll want to ensure you’re able to dedicate enough time to seasonal maintenance tasks, such as snow removal and lawn mowing, and you’ll want to set aside time for other periodic tasks, such as plumbing, inspections, etc.

• Down payment, mortgage payments and other upfront and ongoing costs

While renting usually requires first and last month’s payment, purchasing a property usually requires a down payment, which can be a hefty sum of money, and anywhere from 5%–20% of the total purchase price. For example, in Canada, if the purchase price of your home is $500,000 or less, you would need to place a minimum down payment of 5% of the home’s full price. On the other hand, a home that costs $1 million or more, would require you to put down at least 20% of the purchase price.

In addition to a down payment, you may need to set aside some funds for home inspection and appraisal fees and any repairs and renovations that need to happen before you move in. Plus, you’ll want to ensure that you can afford the ongoing costs of homeownership, such as the monthly mortgage payments, utilities, property taxes, mortgage protection insurance, homeowners insurance and fire insurance. Property taxes and insurance payments continue even after the mortgage has been paid in full. If you’re purchasing a townhouse or condominium, there may also be some extra building fees included.

Note, although you’re not paying rent that could increase year after year, your monthly mortgage payments can also increase if interest rates rise.

In Canada, getting approved for a mortgage involves passing a stress test, which means mortgage providers will be looking closely at your income-to-expense ratio. To improve your odds of being approved for a mortgage, you may want to ensure that your total mortgage expenses (including property taxes, principal repayment amount and interest) amount to less than 35% of your average gross (pre-tax) monthly income. That way, you may still invest your money in other priorities or save.

For example, let’s say your gross annual income is $75,000 and your gross monthly income (pre-tax) is $6,250. To ensure you’re spending no more than 35% of your monthly income on mortgage expenses, you’ll want to spend under $2,188 per month on housing costs, property taxes and other mortgage costs.

Also, in order to approve your chances of qualifying for a low interest rate on a mortgage, it’s a good idea to closely monitor your credit score and ideally, maintain a high credit score.

Which option is best for me?

Now that you’re aware of the pros and cons of renting versus owning a property, let’s discuss the best options for you. Although deciding whether to rent or own often feels like a forever commitment, it’s important to remember that you don’t actually have to commit to one or the other permanently. You may prefer renting during one period of your life, and after some time, discover that owning a townhouse makes more sense.

The first step to deciding whether homeownership is right for you, is to examine whether you’re financially able to buy a home. You may also want to ask yourself the following questions: Where are my finances currently? Will I be able to comfortably afford long-term mortgage payments? Generally, you can afford a mortgage that is between two and two-and-a-half times your gross annual income, although speaking to a Mortgage Advisor would give you a more precise understanding of how much mortgage you could potentially afford, based on your unique situation.

Some honest soul-searching and looking ahead to where you’ll be financially in the next five to fifteen years might be the key to figuring out your future goals. It could also help you decide whether purchasing a home fits in your long-term plan of action.

After you’ve determined whether you’re financially able to afford a mortgage, you’ll want to ask yourself the following questions:

• Do I have the money management skills and discipline to manage this large purchase long-term?
• Am I ready to sacrifice time, energy and money for up to fifteen years?
• Am I willing to dedicate regular time to the upkeep and maintenance of a home?

What's next?

If you’ve already evaluated your budget and long-term goals, and all roads lead to purchasing a home, congratulations! Whether you’ve already begun the hunt for a home you love or you’re unsure where to start, now could be the perfect time to figure out the maximum purchase price you qualify for.

The QuestMortgage® Affordability Calculator helps you see what size of a mortgage you can afford and determine a comfortable price range, so you can shop for your new home with confidence.

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The information in this blog is for information purposes only and should not be used or construed as financial or investment advice. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied, is made by Questrade Group of Companies, its affiliates or any other person to its accuracy.

What you'll learn:

• Factors to consider before beginning the home search
• How to determine how much mortgage you can afford
• The qualities of a good real estate agent

Buying a home can be a time-consuming process with many decisions. Condo or house? Urban or rural? Brand-new or fixer-upper? This guide walks you through purchasing your very own home.

If you're buying your first home, you’re probably spending a lot of your time sifting through information online, wondering what your next steps should be. To help demystify the home buying process, here’s an overview of steps to take when buying your own home—because purchasing a home should be fun and exciting, not complex and confusing.

1. Decide whether homeownership is right for you

Purchasing a home is a major (and often long-term) commitment, so it’s important to consider whether homeownership truly aligns with your long-term goals and whether you’re financially equipped to handle the purchase.

Before you begin searching for properties, here are some important questions that will help you examine your current situation and find out whether homeownership makes sense for you:

• What is my income and employment status?

What's the first step when determining your readiness for this financial commitment? Having a thorough look at your personal financial situation. This will ensure that you can keep up with the potential monthly mortgage payments, property taxes, utility bills, and any potential repairs.

Start by reviewing your annual income and employment status. Do you have a reliable income source? Lenders will typically ask you to prove your employment status through a letter of employment, or, if you’re a freelancer or self-employed you may be required to provide supplementary documentation, such as personal tax Notices of Assessment from the past two to three years and contracts that show your expected revenue in the coming years. To learn more about the documents you may have to submit to verify your income and employment status, see important documents for a mortgage application.

• What is my debt-to-income ratio?

Aside from reviewing your income, look at any outstanding debt to calculate your debt-to-income (DTI) ratio. Your DTI ratio is the percentage of your gross monthly income that goes toward your debt, and it’s an important factor in determining your mortgage eligibility, and how much mortgage you can afford.

For example, if your gross income (before taxes) is $5,000, and your total debt is $1,750, your DTI ratio would be 35%. This means approximately 35% of your gross monthly income is going toward paying down your debt.

($1700 ÷ $5000) x 100 = 35%

If your DTI ratio is high, it could be difficult to afford monthly mortgage payments. So, you may want to work towards paying off as much debt as you can prior to purchasing a home. This will not only help your DTI ratio, but can also positively impact your credit score.

• What is my credit score?

Your credit score is an important factor when qualifying for a mortgage and will impact the interest rate you receive. Checking your credit score allows you to see your credit status and if needed, make a plan to improve your credit score before applying for a mortgage. If your credit score isn’t where you’d like it to be yet, practicing healthy credit habits is a great way to raise your score. For more details on credit habits that could help increase your score, check out the lesson understanding your budget and credit.

• Am I willing to live in the same area for an extended period of time?

Although you don’t need to live in the property for the entirety of your mortgage term, purchasing a home can still be a big commitment that impacts your ability to move. Because of this, it may be helpful to plan to live in your chosen area for an extended period of time. For example, if you’re applying for a job in another country, it may not be the right time to purchase a home just yet.

2. Decide where and what type of property you’d like

Now it’s time to give some thought to your goals regarding what property type you’re looking for and where you’d like to live. Here are some questions to consider:

• Which neighbourhoods meet your needs and are within your budget?
• How close/far are you willing to be from your workplace?
• What amenities are nearby (like schools, highways, malls, restaurants, medical services, etc)?
• Is there a specific type of property you’re interested in (single-detached home, duplex, townhome, condo, apartment, etc)?

Different properties can also have different fees. For example, you may be required to pay condo fees (in addition to property taxes) when purchasing a condominium. If you choose a single-family home, you may be required to pay higher property taxes or contribute to a homeowner’s association. Ultimately, it’s important to consider what property type and location best suits your needs.

3. See what you can afford

Determining how much you can afford to spend on a potential mortgage helps you set a more realistic budget based on the expected costs of your home. Your mortgage amount will depend on your financial needs and lifestyle habits, so taking a good look at your financial situation could help you understand your budget range. Also, it may be helpful to review any factors that could influence how much mortgage you can afford, such as childcare, current debt, etc.

4. Begin saving for a down payment

Whether you’re buying a single-detached home, townhome, or condo, you’ll want to ensure that you have a down payment saved before applying for a mortgage. In Canada, the minimum down payment amount is 5% of the property’s value, however, you could be required to pay more, depending on the price of the property you’re looking to purchase. To better understand how your down payment amount may change depending on the purchase price, see the lesson mortgage affordability and down payment.

Taking time to save for a larger down payment could be a huge benefit when you start searching for homes because it could make it easier for you to get approved for a mortgage. Plus, if you save a down payment of 20% or more of your purchase price, you could forgo mortgage default insurance, which is an extra cost added onto your mortgage loan.

5. Prepare for closing expenses

When saving to purchase a home, you’ll also want to put some money aside to pay for closing costs, which are typically 3%–6% of the property’s purchase price. For example, when closing a real estate purchase, you may be required to pay legal and administrative fees—1.5%–4% of the selling price. Other closing costs may include title insurance, mortgage default insurance, taxes on mortgage default insurance, land transfer tax, and more. Note, whether or not you pay land transfer tax, and the total amount you end up paying ultimately depends on your location, since different provinces have different requirements surrounding this tax.

Also, you should set some money aside to get a home inspection to investigate any issues with the property before you buy.

6. Get pre-approved within four months of purchasing

If you’re planning to purchase a home within the next four months, a mortgage pre-approval is a great next step. It allows you to house-hunt with confidence and act quickly once you’ve found the home for you. Getting pre-approved also gives you a competitive edge as a buyer, as sellers may prefer selling to those who have already gotten pre-approved. Also, some realtors will not agree to represent you unless you have a mortgage pre-approval.

While a pre-approval is a great advantage in the house-hunting process, it’s important to note that it’s not an official mortgage approval. To receive full approval for a mortgage, the property you choose will need to meet the conditions of your mortgage provider, and you may need to verify your income and debt.

7. Contact a realtor

With a pre-approval in-hand, it’s time to begin looking for homes within your budget—and the help of a realtor can make this easier. Realtors offer information and guidance as you search for your home, and they are also able to help sort out paperwork, contracts and submit offers. So, working with a good one could significantly smooth out your home buying journey.

To find a real estate agent, you can visit the Canadian Real Estate Association website and review the Find a REALTOR® search section. When searching for a real estate agent, look for someone who:

• Listens to your requests and respects your budget
• Arranges home visits and helps arrange a professional home inspection
• Is knowledgeable about their community and the local real estate market
• Can help you negotiate a better deal that reflects the property’s value
• Lets you know when is a good time to buy
• Discusses how much you should be prepared to purchase a home for

8. Search for properties within your budget

Now, with the help of your realtor, you can schedule showings and view the listings you have your eye on. One thing to remember is that your first home doesn’t have to be your only home, or your last home, so being flexible about your must-haves is best. To find a budget-friendly home, you may want to consider looking in neighbourhoods that are more affordable, or shift your criteria to a smaller home or one that is farther away from a downtown city core.

9. Make an offer

Determine what you are willing to offer, based on what similar properties are listed and selling for and your budget. Researching what other similar properties are selling for will help you be as informed as possible, and if you are using a realtor, you may want to get their support as well during this process.

Your realtor can also help you decide whether to add conditions to your offer, depending on your situation and the property. For example, you may choose to make a conditional offer that depends on your mortgage provider financing the property. This allows you to cancel your offer if the lender does not agree to finance the home.

10. Get a home inspection

When making an offer, it’s a good idea to do so with the condition that the home passes a professional home inspection, if possible. That way, if the inspector finds serious problems with the house, you can cancel or change your offer.

Finding qualified home inspectors can be as easy as browsing the Canadian Association of Home and Property Inspectors website. Your real estate agent may also provide you with a list of home inspectors. A home inspector’s job is to see if a home is in good, safe, and liveable condition. They will also identify problem areas that may require repairs now or in the future.

Your home inspector will also provide a report that you and your realtor may review. This report will help you decide whether any potential repairs will impact the price you agree to purchase the home for.

11. Find a lawyer

If your offer of purchase is accepted, you’ll need to hire a real estate lawyer or notary to transfer the home to your name. Along with closing expenses, you’ll also want to set some money aside to pay for their services.

A real estate lawyer is responsible for reviewing all legal documents and issues related to your property purchase. Aside from drafting the mortgage documents and double checking that property taxes are up to date, your lawyer will also handle the money transfer and be your go-to if you come across an issue shortly after closing the sale.

12. Close the deal

Once your offer has been accepted, the closing period begins, during which you will finalize all the details of your purchase. It typically lasts around 90 days, although it may vary. Since you’ll have had your home inspection, it’s important to check that any repairs have been completed properly.

During this period, you may also want to obtain homeowners insurance, which protects you from future events that may impact your home, such as a fire. Most mortgage providers require you to get homeowners insurance before officially approving you for a mortgage and offering you financing.

Closing day—the final day of the closing period—may take place weeks after you sign the sales and purchase contract. On this day, your lender will provide your lawyer or notary with the money for your mortgage, while you will provide the closing costs and purchase price. Your lawyer or notary will transfer the funds to the seller, register the home in your name, and finally, provide you with the deed and keys to your property.

13. Move in

The home you’ve been dreaming about is all yours! What’s next? It’s time to update your address on all legal documents, as well as any subscriptions or accounts with mailing addresses.

You’ll also want to remember to tie up any loose ends, such as contacting utility companies to set up or transfer utility services, connecting internet and cable services, and purchasing or moving furniture.

What's next for you?

See how much you could afford

If you’re thinking about purchasing a home, now is a great time to figure out what you can afford with our Affordability Calculator. This handy tool helps you see approximately how much mortgage you could afford and what your mortgage payments could be.

CALCULATE NOW.

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This article is for information purposes only and should not be used or construed as advice or recommendations by CTC or its affiliates with respect to mortgages, real estate transactions or other related topics. 

Pre-approval may only be available for certain mortgage terms. The purpose of the pre-approval is to hold an interest rate (for fixed rate mortgage pre-approvals) or to hold a modifier to the QuestMortgage Prime Rate (for variable rate mortgage pre-approvals) for you for the period the Pre-approval Rate Hold Guarantee is in effect and can only be relied upon if you are approved for a QuestMortgage. The Pre-approval Rate Hold Guarantee is in effect from the time you are pre-approved for a period of up to 120 days, after which this guarantee expires; other conditions may apply. Pre-approval does not provide any form of guarantee that you will be approved for a mortgage.

The down payment, monthly mortgage payments, and property taxes. You may have known these “payments” as the costs associated with homeownership. While this is true, there are other costs when it comes to buying and maintaining a home.

If you've been considering getting into homeownership or are already on your way, read ahead. The following guide will walk you through the cost of homeownership, from your initial costs such as your down payment, to your ongoing costs such as monthly mortgage payments, taxes, and utilities.

Initial Costs

Let’s start with the first payments you have to make when purchasing a property, which comprises three costs based on three stages during a property sale.

Upfront cost

Down payment: The down payment is a percentage of the total cost of your home that you pay upfront and does not come from a mortgage lender. In Canada, the minimum down payment for a home is 5%, but this will depend on the price of the house you’re planning to purchase.

The following is the required down payment for any properties used as a primary residence in Canada:

• $500,000 or less – 5% of the purchase price
• $500,000 to $999,999 – 5% of the first $500,000 and 10% of the purchase price over $500,000
• $1,000,000 or more – 20% of the purchase price

Before closing

Home inspection: When you have a property under contract, it's important to have the property inspected by a home inspector. This helps ensure you’re getting a property that doesn’t require big repairs that can cost you a significant amount of money once you’ve taken ownership of the property.

A home inspection can cost anywhere from $300 to $800, depending on the size of the home, province, and the equipment used by the home inspector.

Appraisal fee: A home appraisal is another important step before buying a home. This process determines whether the listed price of the property under contract has an accurate estimated value based on the condition, neighbourhood, and location it’s in.

A home appraisal helps give home buyers a negotiation power if the appraisal value of the property comes out lower than the actual price on the contract. On the other hand, lenders look at the appraisal amount to ensure the borrower isn’t borrowing more than the actual home value.

An appraisal fee can cost anywhere between $300-700, depending on the province.

Title insurance: A title insurance is an important cost that protects you against potential ownership issues, such as claims on property, unpaid taxes, or fraud. Typically, it’s favourable for lenders to secure financing if there is title insurance on the property under contract.

A title insurance can vary depending on the value of the home, but ranges from $250-$500.

Closing date

Legal fee: Upon closing date, you'll need a lawyer to manage the legal aspects of the transaction. This includes running a title search and making sure all documents are properly prepared. Depending on the complexity of the property purchase, legal fees can range from $500 to $2,500.

Land transfer tax: When you buy a home in Canada, you'll need to pay a land transfer tax upon the possession of a property. The amount you pay depends on the province you're in and the purchase price of the home. In some cases, the amount for the land transfer tax can reach up to 2.5% of the property’s value. To learn more about the land transfer tax in your province, please check your provincial website which has guidelines for land transfer tax.

Provincial sales tax on CMHC insurance (if applicable): Some provinces, including Ontario, Manitoba, and Quebec, will charge a provincial sales tax on your mortgage default insurance premium upon closing.

Applicable pre-construction fees: Depending on your agreement of purchase and sale of your pre-construction home, you may have to pay other closing costs on the closing date. Please refer to your contract with your developer to determine the pre-construction fees you may need to prepare.

Moving costs

Moving costs are sometimes overlooked, but are still an important expense to remember, especially when you finally purchase a property and secure a closing date. There are a few moving costs to prepare for, depending on your situation.

Home movers: Depending on the amount of furniture and household items in your existing home, you may need professional movers to help you transfer them to the new home. This can be beneficial if you want to save time and energy since moving to a new home can be quite busy.

New furniture and appliances (if applicable): Since you’re moving to a new property, you may have to purchase new furniture or home appliances. This can also be the time to find home appliances that are more energy efficient to help you save on the utilities on a new home.

Moving tips:

When purchasing a new home, ensure that the closing date is not too far ahead of when your existing lease ends. This ensures you don’t renew your lease when you move into your new home.

On the other hand, if you currently own a home and are selling it to buy a new home, ensure your closing dates align with when you’re closing your existing home. Typically, you want to ensure you sell and close your existing home first, then close with the new home you’re purchasing.

Ongoing costs

The cost of homeownership extends beyond the initial cost when you purchase a property. As a new homeowner, you now have to pay ongoing expenses to maintain the property and mortgage. Let’s cover each of these expenses below.

Property and mortgage carrying cost:

1. Mortgage payment: You’ll have to start paying mortgage payments to your lenders, which includes your principal and interest on the mortgage loan. Generally, you’ll be responsible for making mortgage payments monthly or biweekly, depending on your mortgage term.
2. Property taxes: Your property taxes will vary depending on the property type, province, and municipality you’re in. These taxes are used to pay for the improvement and development of schools, garbage collection, road maintenance, and other community services. If you’re buying a property in Alberta or Saskatchewan, you don’t have to pay property taxes.
3. Insurances: As a homeowner, you’re required to get insurance to protect your property and mortgage. This will include property insurance, mortgage default insurance, and creditor mortgage insurance.
• Property insurance: A property insurance protects you against damages or loss to your property. This insurance is mandatory and all homes must be insured when you buy a property in Canada.
• Mortgage default insurance: If you’re putting down less than 20% down payment of a home, your mortgage provider will need you to get a mortgage default insurance. The mortgage default insurance is needed to protect lenders in case you fail to pay your monthly mortgage payments.
• Creditor insurance: A creditor insurance protects you and your family in case of a death or a disability. It can help cover mortgage debt you may have, in the event of critical illness, death, or disability. Typically, a creditor insurance is not mandatory but an optional insurance when you purchase a property.

Condominium Fees:

If you're buying a condominium unit, you'll also have to pay monthly condominium fees. These fees are used to maintain common areas such as hallways, concierge, elevators, and sometimes may also cover the cost of amenities such as gyms and swimming pools. The amount you pay will depend on the size of your unit and the amenities provided by your condominium corporation.

Please note: Depending on your condo, some utilities may already be included in your condominium fees.

Maintenance Costs and Repairs:

Finally, you need to consider the ongoing maintenance costs and repairs associated with homeownership. This can include regular maintenance such as lawn care, snow removal, and cleaning, as well as unexpected repairs such as a leaky kitchen, damaged roof, or malfunctioning heater furnace. The cost of maintenance and repairs will depend on the size of your property, the age and condition of your home, and the specific repairs needed. To learn more about the typical maintenance and repairs needed when you own a home, take a look at this helpful article.

Preparation is key

As you can see, the cost associated with homeownership involves more than just the down payment, monthly mortgage payments, and property taxes. It also involves other initial and ongoing costs that are necessary to purchase a property and maintain it.

As you can see, the cost associated with homeownership involves more than just the down payment, monthly mortgage payments, and property taxes. It also involves other initial and ongoing costs that are necessary to purchase a property and maintain it.

This article is for information purposes only and should not be used or construed as advice or recommendations by CTC or its affiliates with respect to mortgages, real estate transactions or other related topics.