Cost of Buying an Apartment in Canada

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Buying an apartment in Canada is a major deal for many people. The upside, however, is that most people who own their apartment don’t have to worry about accommodation, paying rent, and all the hurdles that come with it. Depending on the area where you are looking to buy an Apartment in Canada, you might encounter some hurdles while other areas might be hassle-free.

The average cost of buying an apartment in Canada is CA$498,943. You’ll be required to make a down-payment of CA$24,947 and have a household income of at least CA$97,000 to be able to afford it.

The average cost is not representative of most Canadian cities as each city has its price determinant. There is currently a huge difference in the prices of apartments in most cities in Canada depending on the neighbourhood. 

Affordability

When considering buying an apartment in Canada, you should put into consideration two major factors:

  • Your household income

This is your gross salary including that of your partner if you have one and they are buying with you. The Big Five Banks often use your household income to calculate how much monthly mortgage payment you can afford.

When determining if you can afford to buy an apartment or not, you must calculate your income, take into consideration the mortgage payment, valued utility costs, and estimated property tax.

  • Down payment

This is the first payment you make towards acquiring an apartment. Legally, you must make at least a 5% down payment. Though it is advisable if can put down a larger sum.

However, if you have other financial responsibilities like student loans, credit card debt, or car payment, these will be considered and might be used to reduce the mortgage you qualify for.

Bear in mind that when considering buying an apartment in Canada, the mortgage payment is not the only financial right of homeownership. Other obligations like repairs, maintenance, etc. should be estimated for – at least 1 – 3% of your apartment’s value yearly.

Saving Towards a Down Payment to Buy an Apartment in Canada

In Canada, the average down payment on a property is 5%. If you are putting down less than 20%, you will need a mortgage default insurance either from Canadian Mortgage and Housing Corporation (CMHC) or a private insurer.

To get this, you must satisfy the insurer that you won’t default your mortgage repayments. For a non-Canadian resident, you are entitled to borrow 65% of the purchase price, so, you will need to make a down-payment of at least 35%. 

Note that foreign banks are not permitted to register mortgages in Canada, so you’ll have to use a conventional one. The process is not entirely hassle-free, expect several interviews, and request for documents and information.

Budgeting for an Apartment Purchase in Canada 

There are several factors to consider when budgeting for an apartment purchase in Canada. Do not leave out anything in your budget, you can get a realtor to assist in your budgeting. Some of the costs that go into buying an apartment in Canada include:

  • The purchase prices
  • Land or property tax
  • Home insurance
  • Bank appraisal fees
  • Home inspection fees
  • Legal fees
  • Closing fees

Using a Realtor

It is advisable to use a realtor when buying an apartment in Canada. Most sellers use and pay for the services of a realtor. Your realtor will facilitate the following:

  • Help you find your ideal apartment
  • Make in-depth research of both property and the province 
  • Negotiate a good price

A realtor is legally responsible to have your best interest and is bound by a code of ethics. So when hiring a realtor, below are some of the things to look out for:

  • He/she must be registered with the Real Estate Council or an equivalent body in your province
  • Must have a thorough knowledge of the neighbourhood
  • Has evidence of representing buyers well
  • Must have experience
  • He/she must come highly recommended

For a non-resident, ensure to get an experienced realtor who understands the ins and outs of foreign property ownership.

Cost of Buying an Apartment in Canada

Buying an apartment in Canada can be quite a hassle from hiring a realtor to seeking mortgage approval. Here in Canada, for an apartment that is less than CA$500,000, you would usually need a down-payment of at least 5%. For apartments that cost over CA$500,000, you must make a 5% down-payment on the first CA$500,000 and 10% on any sum above CA$500,000. And for apartments that are over CA$1 million, you are required to make a 20% down-payment.

Below is an average cost of an apartment per province in Canada, excluding land transfer tax, realtor fees or home inspection fees.

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Simple Guide on How to Buy an Apartment in Canada

You can simplify the whole process of buying an apartment in Canada by following the simple guide below:

  • Check affordability 

Before you consider buying an apartment in Canada, ask yourself “Can afford this?”- check your finances. If you have an idea of what type of apartment you want to purchase and the city, you can easily estimate and compare the prices with your income.

To determine if you can afford a property, check your household income and monthly expenses. Do this by multiplying your gross income by 2.5.

  • Have a substantial down payment

Once you’ve decided on the apartment and city you want to live in, set aside or save up a substantial down payment. The least down payment you can make is 5%, though most financial experts advise you put up to 10%. 

  • Budget for emergency and closing costs

Once down payment has been settled, you must budget for emergency and closing costs. These two fees will take care of several emergencies that might spring up when buying an apartment.

Closing costs are about 1 – 4% of the whole value of the apartment. It is also crucial to have a household emergency fund. You can save up to 1 – 2% of your home’s value yearly to cover household expenses and maintenance.

  • Get pre-approval for your mortgage

This is an important step as it shows your financial standing to any lender and proves that you are a reliable borrower. Pre-approval makes you appear as a serious homebuyer in the eyes of the seller and can facilitate your offer gain acceptance.

Note that you need a good credit score to get a pre-approval and your monthly debts must be less than 44% of your monthly income. There shouldn’t be any variables in your finances throughout the pre-approval. You must prove your finance is under control, and also pass the stress test that shows you can handle a surge in interest rates in the future.

  • Use an Experienced Real Estate Agent and Mortgage Broker

With an experienced realtor by your side, be sure to get the best options available. It is important to hire experts who know their onions and have your best interests at heart.

  • Make an Offer

Finding your dream apartment can be challenging as the market is already saturated. Before concluding on an apartment, ensure you have a list of what you want in an apartment. Also, make sure that any apartment you are going for ticks all your boxes.

By drawing a list, you are sure of what to look out for when doing a physical check. Once you find an apartment that meets your taste, you can make an offer. Before making an offer, ensure to speak with your real estate agent to discuss the appropriate price concerning the current market value.

  • Get an official mortgage approval

Once your offer is accepted, the whole process will start to ease up. Finalize your mortgage approval to ease things. If your financial situation is still the same, it takes about 5 – 7 fays to finalize the deal. If you’re using a mortgage broker, he/she will work with your lender to finalize approval and transfer money to the seller.

  • Home inspection and appraisal

You should work towards setting up a home inspection and appraisal while finalizing the mortgage approval. Ensure they come highly recommended and experienced. Get an appraiser who will thoroughly look at the property and be honest with you in his/her findings.

  • Sign all paperwork

Once the most-difficult aspect has been taken care of, its time to sign all paperwork to seal the deal. Be sure to go along with a real estate lawyer. A real estate lawyer will prepare all the land transfer titles and register the mortgage.

He/she will also walk you through signing your mortgage and authenticating the documents. Your real estate lawyer will serve as an intermediary between you and the seller, therefore, there’s a need to hire an experienced and trusted one.

  • Possess your Apartment

Yes, it has been a hectic journey but the result is a dream apartment. Once the paperwork has been sorted and funds disbursed to the appropriate channel, the apartment is officially yours. Your real estate lawyer might likely be with the keys on the possession day. Thereafter, you can literally, do as you wish with your new apartment.

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Avid researcher, freelance writer, and personal finance enthusiast passionate about financial education and literacy.

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Kareena Maya

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Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.

Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.