Dreaming of owning your own home in Canada? Or longing to buy your first set of wheels, maybe an electric car? When it comes to major purchases, a house and a car are at the top of Canadians’ wish lists. For newcomers, these big purchases can represent an important milestone — putting down permanent roots in your new country. But how do you go from fantasizing about these purchases to making them a reality?
Buying your first home in Canada
Buying a home is a major decision, whether you are a first time home buyer or have purchased a property before. Planning and researching would be a good first step in the home buying process. That’s what Cristiano, originally from Brazil, did. It’s been four years since he first came to Canada because of a job offer. He, his wife and son now want to put down permanent roots in their new country by purchasing a home of their own.
“We have spent the last couple of months really researching our options,” he says. “Even though we own an apartment back in Brazil, with the price of property here in Canada and the exchange rate [to the Canadian dollar], we realized it would not be worth it to sell our place there for a down payment here. Talking to a mortgage advisor has really helped my wife and me figure out what are our best options moving forward.”
Getting advice from a mortgage advisor can also support your research when considering buying a home, especially as a first-time home buyer. “Buying a home may be one of your biggest investments, so you want to feel comfortable with how much you can afford and understand what your mortgage options are,” says Carissa Lucreziano, Vice President, Financial and Investment Advice at CIBC. “An advisor can guide you every step of the way, from how to start saving for a down payment to the programs available to help you qualify for a mortgage and additional costs you should be aware of when buying a home in Canada.” Newcomers can qualify for a CIBC mortgage with limited to no credit history in Canada, learn more here.
For Cristiano, the research he did and advice he received has set his family up for home ownership success. “We now have a timeline, a plan of action as to how to get together a down payment with our current budget and savings, without feeling super-stressed. It definitely feels like the next stage of our lives in Canada is coming together.”
Here are seven things you’ll learn about the home buying process during your research.
A mortgage advisor will review your income, your monthly expenses, debt, the amount you have saved for a down payment, among other factors, to calculate how much you will be eligible to borrow in a mortgage. When applying for a mortgage, a good credit history is also important. While CIBC has mortgage products for newcomers that require limited to no credit history in Canada , it’s never too early to start building up your credit history. Learn more here.
When buying a home, also consider the added expenses and responsibilities that home ownership brings, such as property taxes, utility bills and home maintenance. If you’re buying a condo, there are also monthly fees associated with the property.
There are different types of interest rates to choose from, namely fixed interest rates (a locked-in rate for a specific mortgage term) and variable interest rates (which fluctuate with the prime lending rate). There are many other terms you’ll need to understand such as mortgage term, amortization, high-ratio mortgage and mortgage default insurance, among others. CIBC has a mortgage glossary that defines all of the terms that you’ll need to learn about here.
The minimum amount you need for a down payment depends on the price of the home. If it’s, for example, a two-bedroom condo that’s less than $500,000, you’ll need a minimum five per cent down payment. For homes that cost more than $500,000 but less than $1 million, the minimum down payment is five per cent of the first $500,000 plus 10 per cent of the remaining balance. For homes that cost $1 million or more, the minimum down payment is 20 per cent.
Whatever range you’re in, the more you put down, the less your monthly payments should be. But you should also consider any other financial goals you may have, such as saving for your child’s education, to ensure the cost of your new home does not stop you from achieving them. Take a look at our tips on saving and investing in this guide’s article “Investing in your future”.
Buying a car
As a Newcomer, buying your first car in Canada may also be a big purchase, which raises questions about how you’re going to pay for it. Most Canadians don’t have enough cash to buy a car outright, so they get a loan to pay for the car.
If you’re buying a used vehicle in a private sale, you can talk to your bank about a car loan. If you’re buying a new or used car from a car dealership, you may qualify for financing through them as well.
Having a good credit history is important to get a car loan, but it takes time to build your credit score after immigrating. CIBC offers a program called CIBC Auto Finance Newcomers Program, a special car loan program for newcomers with little to no Canadian credit history, learn more. This program is available through participating car dealerships.
“If you just moved to Canada, you may need a car to get to work, discover the city and take care of your family,” Lucreziano says. “CIBC has programs that can help you purchase a vehicle right away so you have the independence to get where you need to go.”
If you’ve been in Canada a little longer, CIBC Personal Car Loans may also be a good fit for you. With up to eight years to pay off the loan and the possibility of no down payment, this loan makes it easy to purchase a new or used vehicle, learn more here.
Read the other installments of our Newcomer Financial Guide, including articles on the basics of opening a bank account, building your credit history and saving and investing.