Home options to consider

When you think of homeownership what do you picture? A family who bought a large property with a house and white picket fence in the suburbs, or maybe a super-saver who purchased a condominium in the city? The most traditional methods of homeownership are well-known in Canada. But, home buyers today (especially first-time home buyers) can face barriers when navigating the housing market in a traditional way.

While owning land or buying a condo are great ways to create your forever home, they're not the only ones—and there may be other ways for you to cover the cost of your home aside from an old-fashioned mortgage. Here is a break-down of different types of homeownership, and ways to cover the costs so you can explore your options and discover which is right for you.

Ownership types

• Freehold homes

Freeholding is a common type of homeownership in Canada and is usually used for traditional homes, like a house in the suburbs.

As a freehold homeowner, you own your home and the property it’s on. You don’t share ownership or management of either your home or land with any other homeowners.

With this type of homeownership you’re fully responsible for the maintenance of your land and home, as well as the associated costs and property taxes. You’re also free to fully use and control your space within legal restrictions.

Freehold homes typically include duplexes, townhouses, semi-detached homes, and detached homes of all kinds.

• Condominiums or strata

These homes are widely known as condominiums across Canada, with the exception of British Columbia where they are called strata.

As a homeowner of a condominium you own your unit and share ownership of common spaces with other unit owners. These common spaces vary depending on the set-up of your specific condominium complex or building, but include shared spaces within a building (ex. lobbies), space around buildings (ex. landscaping) and amenities (ex. swimming pools).

You are responsible for your unit’s upkeep and property taxes, as well as condominium fees which go towards the maintenance of shared areas and necessary repairs. These fees go towards a condominium corporation which manages maintenance operations, sets guidelines on usage of common spaces and decides the price of condo fees. This corporation may also regulate what changes you can make to your own unit.

Some condominiums also have a homeowners’ association which often takes control of common-area rules and upkeep, usually with a focus on building renovations. These associations also collect fees from owners and can either be paid separately or may be paid through the condominium corporation.

Before purchasing a condominium it’s important to review previous corporation audits and understand how the corporation makes decisions as well as what your rights and responsibilities are as an owner.

Condominiums typically include apartment-style buildings or townhomes.

• Leasehold homes

With a leasehold agreement, you own your house but not the land it’s on. The freeholder or landlord you’re renting from may be a government, company, or individual.

Becoming a leasehold homeowner means that you won’t have full control over your home and the land it’s on. You will need to check-in with the freeholder of the land before making any major changes to your home, but the responsibility of land maintenance falls onto the freeholder.

Leasehold homes typically include townhouses, some apartments, and mobile housing locations.

• Co-operative housing

Housing co-operatives (co-ops) are non-profit properties. Instead of buying a unit in the building, you buy a share of the building and then are assigned a unit. They offer at-cost housing for their residents and usually only collect fees from residents to pay for essential building expenses.

Co-ops have rules and require lots of social interactions for property maintenance and decision making. When it comes to buying and selling co-op shares, buyers will need a share loan rather than a traditional mortgage. Mortgage insurance isn’t available, so it’s necessary to have a minimum down payment of 20%. A co-op’s board also has the right to reject potential buyers if they feel the buyers won’t be a benefit to the community. They are also rarer than other kinds of housing, so they may be harder to find in your home search.

Co-ops are typically apartment-style buildings.

Funding options

• Resourceful down payments

Saving for the up-front costs of a home can seem daunting, but it doesn’t have to be. There are resources available to make reaching your down payment goals easier and speed up your home buying journey.

For first-time home buyers, The Home Buyers' Plan allows you to withdraw up to $60,000 tax-free from your Registered Retirement Savings Plan for a down payment on eligible residences. Once you withdraw the funds, you have up to 15 years to pay it back. Repayments begin five years after you withdraw the funds.

Another source of funds may be your family. If you are able to secure a gift from a relative, it can be used towards your down payment as long as it is accompanied by a gift letter and the financial gift is in your account at least 15 days before the closing date of your home purchase.

Securing your goal down payment can also come sooner when engaging with shared-equity programs or co-investment companies. With the financial support of these companies or programs, you can secure funds towards the purchase of your home—and in return they will own a percentage of your home. An example of this is the Canadian government’s First-Time Home Buyer Incentive.

• Living like-minded

If there are people close to you who are in the market for a home, and have similar objectives, you could consider purchasing a home together. Do you have friends or family who are also hoping to buy a home? Maybe you are house-hunting in the same neighbourhood, or maybe you want to live in the same type of home. Combining your buying power and living together can increase your chances of success in the market and you all could get into your dream home sooner.

Shared living arrangements could be more common in the future because co-ownership is being seriously considered by many young Canadians. A 2022 generational trends report found that among urban-dwelling Generation Z Canadian adults (the generation following millennials in Canada) who are working towards buying a home: 24% plan to co-own their first home with family, 13% plan to co-own their first home with friends or others outside of their family, and being based in Toronto or Vancouver increases the likelihood of planning to co-own.

If you’re considering co-ownership there are some details to discuss about the arrangement before you buy:

• Ownership division: When purchasing a home together, ownership does not have to be split evenly. Portions of ownership can be divided up into different percentages for each party to accommodate your situation as a group.
• Living arrangements: Co-ownership can mean sharing a space in many different ways—like living communally or dividing it up into separate units for each party.
• Property value: Decisions as a homeowner can affect your property’s value, and your home’s unique setup means each party can be affected by changing property values differently.
• Moving on: What is your plan if a party wants or needs to sell their part of the home? Deciding whether a portion of the home can be sold (and if so how much influence the remaining parties have on its future owner) can make things smoother if this situation comes up down the road.

• Renting or hosting

One way you could afford your dream home is by using a portion of the home as a rental property. The income you would get from renting it can be used to help cover the cost of the mortgage. There are multiple ways you can go about this, from long-term leases with tenants to short-term rentals for vacation stays.

Some Canadians are already using their homes for rentals and it could be growing in popularity. A 2022 study found that the number of Canadian homeowners renting their homes is slightly increasing, and 8% of Canadian homeowners have listed their home on a website for short-term rentals.

Besides living space, you could also rent portions of your home for other activities. If you have a house with a private swimming pool or a home office that could be a way of making some extra money towards your mortgage payments.

Planning to go this route? Here are some questions to ask yourself before committing to a renting or hosting set-up:

• Does the neighbourhood you're hoping to purchase your home in legally allow you to rent part of your property?
• Will you need to make any financial investments (e.g. renovations or additional appliances) to prepare your home for renters or guests?
• How will using the home as a rental property affect your mortgage application?
• Will you need additional insurance for the rental?
• Do you know what the full responsibilities of being a landlord or host include and are you prepared to commit to them?

• Starting small and scaling up

If your dream home is currently out of reach, but you still want to break into the real estate market, you can consider starting small and working your way up. Small condominiums can offer a less-expensive starting point in comparison to large detached homes.

While they do come with condominium fees, the shared amenities, maintenance costs and/or services they cover could be less expensive than accessing them on your own. If you’re able to afford living in a smaller condominium and saving then this could be an option to consider.

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.