Buying property in Canada is relatively simple.
Anyone who is planning to stay in the country for up to six months is free to purchase real estate in Canada, even though they are considered a non-resident. While some provinces (Alberta, PEI, and Manitoba) offer some restrictions as to how much and the type of land non-residents can buy, the province of Ontario does not. Expats coming to Toronto looking to buy property should encounter relatively little in the way of bureaucratic obstacles. That said, foreign buyers in Toronto still encounter the usual hoops involved in the real estate process, such as the relatively high demand for houses in Toronto, the high cost of property in popular neighborhoods, and the payment of property taxes to the city of Toronto upon acquisition of ownership.
While the majority of Toronto property is owned by citizens, there are quite a few foreigners who buy property in Toronto. Anyone frequenting the city for business might want to consider purchasing a condo to use during their stay. Franchise locations are also a popular choice for purchase.
The Purchasing Process
Those wishing to purchase property in Toronto should begin by getting in touch with a real estate agent. This agent will meet with you for a consultation, where they will determine the type of home you are looking for, the type of neighborhood you might like to live in, the amenities that are important for you (schools, workplace, shopping centres, etc), and the amount of money you are willing to spend. Your agent will then search for homes that meet your criteria and schedule viewings at your convenience.
Alternately, you may wish to search for a suitable home yourself, by exploring your desired neighborhoods, finding homes that are for sale, and contacting the agent listed on the sign. Open houses are also very common in Toronto, and are usually scheduled on weekends. Here, the home for sale will be opened for a period of time for anyone to enter and the selling agent will be on hand to entertain offers from anyone wishing to bid on the house.
Before you begin the hunt for a house, you must first make sure that you have your finances are in place. It will probably be necessary for you to secure a mortgage in order to pay for the property. Arranging a mortgage loan is usually a joint effort between you, your real estate agent, and your bank. You will be expected to make monthly payments towards paying back the mortgage loan to your bank, plus interest. The interest rates of an average mortage loan in Toronto vary according to how long it takes to pay the loan back. For a one year fixed rate mortgage plan, the interest is around 3%. For a five year fixed rate mortgage plan, you can expect to pay as much as 6% interest or more. Making sure that you are pre-approved for a mortgage is a very important step in a city like Toronto, where the housing market is very competitive.
Once your financing is in place and you find a home that suits your needs and is within your price-range, you might want to consider purchasing a home inspection. This involves paying an accredited home inspector to determine the condition of the house and surrounding property. The home inspector will also provide you with a full report on the condition of the home, electrical, plumbing, and heating systems, and the condition of any major appliances that are being left at the home such as a washer, dryer, or dishwasher. You can expect to pay around $500 for this service. It’s important to note, however, that many home sellers in Toronto will pay for a home inspection prior to putting their home on the market. Always ask the seller for a home inspection report before paying for one yourself.
If you are satisfied with the condition of the property, it is time to place a bid. The seller’s agent will most likely have a minimum purchasing bid in place. You have the option of meeting this bid. If you are the only buyer interested in purchasing the property, you may be able to undercut the minimum bid, and barter with the seller to get a more reasonable price for the home. Bear in mind, however, that Toronto is a very aggressive home owner’s market, and cases like these are extremely rare. It’s more likely that you will be one of many buyers who are interested in bidding on the home. In this case, you will probably need to bid higher than the minimum bid offered by the seller, in an attempt to outbid your rival buyers. During this process, the house is still on the market, and you are free to pull out at any time. If, however, you are the last bidder standing, the sale of the home will be considered final and the property will be considered off the market. As the buyer, you will now be expected to pay a deposit of up to 5% of the purchase price of the home. Should you change your mind and decide not to buy the home, this deposit will not be refunded.
Real Estate Agents
Real estate purchasing in Canada should always be done through a real estate agent. Realtors in Canada are, for the most part, self-employed and are paid on commission by the seller. You may purchase property, using any realtor, even if they did not originally list the property. Purchasing a house in Canada usually involves 2 agents: the purchaser’s agent, and the seller’s agent. Dual agents are required by law to declare that they represent both seller and buyer up front, to prevent driving up the costs & their commission.
There are many, many real estate agents to choose from, but the following 5 companies should help you narrow your search.
Non-Canadian residents are usually required to provide a 35% down payment on the total cost of their property, with the remaining 65% paid out in mortgage financing over a 25 year period. Qualifications for mortgage financing is pretty much the same for residents and non-residents of Canada. Those who wish to apply for a mortgage must get in touch with a Canadian financial institution and provide information such as assets, liabilities, employment, and income information. Documentation usually includes income verification (such as a T4 slip or equivalent), tax returns, a letter from the borrower’s own bank stating that all accounts are in good standing to date (also known as a banker’s report), down payment confirmation via bank statements, 2 pieces of official ID and a real estate appraisal.
Foreign banks cannot broker a mortgage in Canada, so expats hoping to secure property in Canada must go through a Canadian broker or financial institution. There are many to choose from, but in Canada, the big 5 financial institutions provide mortgage financing. They are:
- The Royal Bank of Canada
- Scotia Bank
- The Canadian Imperial Bank of Commerce
- The Bank of Montreal
- TD Canada Trust
Those seeking a mortgage should consult the services of a Canadian lawyer or notary public to prepare the mortgage documents and register with the Ontario Land Registry office. For a list of Land Registry Office Locations, click here. All papers should be prepared well in advance of the mortgage payment deadline, especially if they need to be couriered out of the country for signing.
There are three types of housing ownership to consider. There is freehold ownership, condominium ownership, and renting.
- Freehold ownership is where you purchase a house with land, and you can sell your house at any time. It is not co-owned or co-managed with others, and you have full ownership. This is typical of most detached and semi-detached homes.
- Condominium ownership refers to when you purchase a living space, usually a flat or apartment that is a part of a bigger building. You own your unit, but may be limited as to when, how and to whom you can sell it. The owners’ association takes care of things related to the common space that all owners share which can include fitness centers, swimming pools, playgrounds, laundry facilities, and more.
- Renting means that you do not have ownership of your living space and cannot sell it. You are responsible for monthly rent payments, and may be locked into a longer-term lease agreement. The landlord is responsible for maintenance of the property. Often a superintendent or other property manager will manage the building in which you live.
Most new arrivals will likely rent an apartment or house before buying. If you choose to rent in an apartment complex or from a rental company, you will usually need to sign a lease agreement. A standard lease is for a period of 12 months. It should cover what is included in your lease, including the space you have, the utilities (if any) that are included, and the policy for increases in rent. To view a sample lease agreement, go to http://www.free-legal-document.com/free-property-rental-agreement.html. Ex-pats who are renting an apartment in a private residence or above a privately owned business may not require a lease when renting property. It is up to the landlord as to whether or not any paperwork needs to be filled out. Please see our section on Renting for more information.
Anyone can buy a house or condominium unit. In some areas you will find that it is very difficult to find a place to rent, and buying may be your best option.
The Canadian government has published an excellent resource that will answer most of your questions about renting or buying your home, the Newcomers’ Guide to Canadian Housing, at http://www.cmhc-schl.gc.ca/en/co/buho/upload/TheNewcomersGuide_E.pdf. More information on lease agreements is on pages 18-20 of the guide, and more information on how to buy a home in Canada is on pages 29-40.
The city of Toronto does collect revenue from revenue taxation and maintains the authority to implement other methods of taxation, as outlined in the City of Toronto Act, which was written in 2006. The amount you can expect to pay is comparable to most cities of Toronto’s size, but vary according to the area of the city that you live in, the size of your property, and the types of amenities that can be found in your neighborhood. Property taxes in Toronto are usually paid 2 times a year: once in mid-May, and once in early July. For more information about property taxes in Toronto, click here.
Additional Online Housing and Real Estate Resources
- The Toronto Real Estate Board: Lots of information about buying homes in Toronto. http://www.torontorealestateboard.com
- Lots of homes for sale throughout the city. http://www.torontohomes-for-sale.com
- Canada Mortgage and Housing Corporation: Learn about getting a mortgage. http://www.cmhc-schl.gc.ca
- Oakville, Milton and District Real Estate Board: http://www.omdreb.on.ca
- York Region Real Estate Board: http://www.yrreb.com
- Brampton Real Estate Board: http://www.breb.org
- Mississauga Real Estate Board: http://www.mreb.ca
- Realtors Association of Hamilton / Burlington: http://www.rahb.ca
- Canadian Real Estate Association: General information about the real estate industry. http://www.crea.ca