Housing: The advantages of buying or renting property in Canada

Canada is often recognized as a country with a high standard of living. Each year, it attracts many migrants who have to learn to navigate the Canadian real estate market. Whether you want to live in the city, the suburbs or the countryside, housing availability and price ranges can vary significantly. This raises an important question: should you rent or buy? To figure out what’s right for you, make sure to evaluate both options—ideally before you arrive.

It can be helpful to know that suburban homes are often more affordable than condos in the heart of downtown Montreal or Toronto. That said, housing costs aren’t limited to the monthly rent or purchase price. You’ll also need to cover a number of secondary expenses.

Suburban homes often have more space, but living away from the city can come with higher transportation costs. In an urban area, you might be able to run a lot of your daily errands on foot and use public transit, which tends to be cheaper than owning a car. So don’t forget to factor your lifestyle preferences into this decision.

Renting can be a good option for new Canadians who want to take the time to adapt to their new environment and explore different neighbourhoods before they commit to a particular area.

While homeownership is often thought of as a path to building long-term wealth, renters can also build a substantial nest egg by setting aside the money they save by renting and watching it grow. That being said, with high inflation and rising rents in many cities, renting may not always be the cheaper option. Ultimately, it depends on your budget, neighbourhood and the kind of home you want to live in.

To make an informed decision, you need to get a clear picture of your financial situation by taking stock of how much cash you have, your current and anticipated income, your future plans and your family’s needs. Keep in mind that, in order to lease a home in Canada, applicants generally need to be able to prove that they can afford the monthly rent.

You could also be asked to provide references from people you’ve rented from in the past, along with information to confirm your identity and check your credit history. These checks help show that you can be relied on to pay your rent on time and keep the unit in good shape.

Renting a home in Canada can require a bit of preparation, especially if you’re brand new to the country. Following key steps and preparing certain documents ahead of time can help streamline the process.

• Start your search early. In Quebec, most leases start July first. Lease renewal notices can be sent out as early as January, so ads for homes with a July first move-in date start popping up in February. You can still find a rental property any time of the year, but your options may be more limited.

    The housing supply can also vary depending on the region, season and type of home you’re looking for. That’s why, you     should start looking a few months before your planned move-in date. The rules can also vary from one province to the     next.

• Most leases are for one year. Depending on the arrangement you wind up making, leases can be month to month, year to year or open-ended. One-year leases are the norm, however. Some rentals come furnished or semi-furnished, but these offers are less common.
• Pay your rent on time. Your payment due date should be stated on your lease. In Quebec, rent is usually due on the first of the month.
• Be ready to show that you’re a reliable tenant. Providing references, a letter from your employer and proof of income or available funds can help strengthen your profile and fast-track your rental application.
• Get tenant insurance. Tenant insurance is always a good idea, as it helps protect your belongings against common claims like fire and theft. It can also provide liability coverage if you’re ever held responsible for causing bodily injury or property damage to another person by accident.
• When you move out, leave the space as you found it. At the end of a lease, tenants are generally expected to leave the property in a similar condition as they found it when they moved in.
• Consult official resources. In Quebec, the Tribunal administratif du logement has an array of tools to help tenants understand their rights and obligations.  

Last but not least, be careful when looking for a rental online. In one common scam, online ads feature misleading photos and descriptions to attract applicants. The asking rent for these properties tends to be unusually low. When a prospective renter shows interest in the property, the person who posted the ad asks for a deposit to reserve the apartment, usually via e-transfer. But it turns out the apartment either doesn’t exist or doesn’t belong to them. Never pay a deposit before you’ve seen the property in person. If something seems too good to be true, it probably is.

If you have the financial resources to do so, buying a home can be a great option. Yes, newcomers to Canada can purchase real estate. That said, there are rules about who can buy a residential property in Canada without being a citizen or permanent resident. 

The Prohibition on the Purchase of Residential Property by Non-Canadians Act provides certain exceptions that allow a temporary resident to buy a home in Canada as long as they meet all of the prescribed conditions. 

For most people, buying a home requires a lot of financial and logistical preparation. The following key elements will help inform your decision and streamline the process.

• Get to know the real estate market. In Quebec, online platforms like DuProprio list a wide range of properties that are currently for sale. The DuProprio website is an excellent place to start, since you can use it to compare neighbourhoods, property types and asking prices.
• Assess your financial capacity. Figure out how much home you can afford by estimating your mortgage payments, minimum down payment and closing costs. You’ll also need to consider things like municipal taxes and school taxes, legal fees and potential renovations. Check out our Steps for first-time home buyers for more information.
• Get the right support. Real estate brokers, professional appraisers, building inspectors, land surveyors, notaries in Quebec and lawyers in Ontario can be a big help when it comes to buying a property. There’s a lot of information online about what these professionals do and why you should consider working with them. For example, you can check out material available from their professional orders, business associations and company websites.
  
• Demonstrate your creditworthiness. Even if you haven’t had time to build your credit history in Canada, there are other ways to prove your creditworthiness. For example, a record of timely payments on a car lease or apartment rental, childcare costs, insurance premiums and public utility bills such as your electricity, gas, internet or phone bill.

• Save up for a down payment. Depending on your financial situation and the cost of your future home, it can take time to save enough money for a down payment. Homes that cost $500,000 or less require a minimum down payment of 5% of the purchase price. Depending on the fair market value of the property, some homes may require a higher minimum down payment. If your down payment is less than 20% of the purchase price, you’ll need to take out loan insurance with one of Canada’s official mortgage insurance companies: Canada Mortgage and Housing Corporation (CMHC) or Sagen.You’ll also need to show where the funds came from and provide transaction records from a bank account in your home country to show how long you’ve been holding the funds, or when you started saving, if applicable
• .Have the property inspected. An inspection is a visual examination carried out by a building inspector. Their role is to identify potential property defects before the purchase is finalized. If your purchase offer is conditional on an inspection and the inspection report reveals issues, you might be able to renegotiate the purchase price or withdraw your offer.
• Understand your mortgage conditions. Make sure you understand the terms and conditions of your mortgage. Don’t be shy about asking your mortgage representative for more information, especially if you have questions about your payment conditions, amortization period or loan term.
•  Learn about different types of insurance. Mortgage insurance can cover your mortgage payments in the event of death or disability, subject to applicable conditions, limitations and exclusions. Home insurance covers your property against losses. You can also take out civil liability insurance, which protects you against accidental damage to another party. Home insurance isn’t a legal requirement (unless you own a condo in Quebec), but financial institutions usually require you to have it.
• Keep in mind that every situation is unique. If you’re not sure which option is right for you, take some time to evaluate your needs, assess your financial situation and think about the kind of life you want to lead in Canada. Our Desjardins mortgage representatives are also here to support you through every step of your homeownership journey. 

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