By Kim Hart Macneill
It’s not uncommon for nervous first-time homebuyers to pepper mortgage broker Shawna Snair with questions. She says what surprises most is just how simple the process is with the right team in place.
“Canada makes it easier for a new immigrant to get a mortgage than someone who is established here,” says Snair, who work with Premiere Mortgage Centre in Halifax. “There are lots of ways to get around the hurdles with this program. That’s the biggest thing to remember: it really is quiet straight forward.”
The first step to buying a home in Halifax is assembling the right team to work with you.
A realtor can help you find a home that fits your size and location needs, and budget.
“One of the benefits of using an agent is that’s someone who negotiates on your behalf and wraps up the initial offer with the person you’re buying the home from,” says Andrew Nicol, a real-estate lawyer with BoyneClarke in Halifax.
A lawyer handles the property transfer at the end of the purchase, but hiring one for the entire process will make things easier. “A lawyer’s job is to act in the best interest if their client,” he says. “They’re going to advise you of any risks they see as you go through the process.” Additionally, your lawyer can review documents from your realtor and bank (if you’re getting a mortgage) to ensure everything is covered.
An immigrant needing a mortgage to purchase their first home need a broker to act on their behalf. “It’s always better to speak with a mortgage broker first to ensure that you’re buying something within your budget,” says James Shinners, president of Mortgage Managers brokerage in Bedford, Nova Scotia.
You can work with a broker at a particular bank, or hire an independent broker, like Snair or Shinners, who will help you find the bank and mortgage best suited to your situation.
For immigrants, how long you’ve been in Canada affects the type of mortgage you can get.
“You don’t necessarily have to walk off a plane and go see a mortgage broker the same day,” says Shinners, “but from the bank’s perspective, after five years you should have established credit. As a new Canadian there’s no real credit requirement.”
Permanent residents here five years or less can purchase a property that costs $1.5 million or less using a mortgage without the credit requirements that established Canadians face.
“You can only do this program once, that’s something to keep in mind,” says Snair. “Your next mortgage has to be income qualifying, and like any other Canadian getting a mortgage. This is the first one to get you established in Canada.”
Whether your mortgage is insured or uninsured will change the process, and your interest rate. “Insured or uninsured will change your down payment a lot,” says Snair. “If you have a job and some credit then we can do five per cent down, if you don’t then it could be up to 35 per cent.”
Insured mortgages are subject to many of the same rules that non-immigrant Canadians must follow.
They require a minimum of three months full-time employment and that applicants meet a gross debt-to-service ratio of 4.6 or under. Additionally, five per cent of the down payment must come from the buyer’s own resources; the remainder may come from a family member.
Uninsured loans demand only proof of permanent residency. “[The bank] might look to alternate sources of credit, like three months worth of rent and cellphone payments in Canada,” says Shinners. “That highlights that you have a repayment history.”
Immigrants buying without a mortgage still have rules to remember. “In any offer [to buy a home] there are going to be conditional dates that the buyer has to meet or they will lose the deposit they have put down,” says Nicol.
These include deadlines for hiring a home inspector (to ensure the house is in good condition), securing financing, and having a lawyer review documents prepared by the seller’s agent or the bank.
“That’s the busiest time for any home buyer is making sure all of those different condition dates are meet and in order so they can purchase the house,” says Nicol. A lawyer and a realtor can help you keep up on all of those dates.
Another date to keep in mind is your closing date. This is the day the house officially becomes yours.
Snair says she reminds immigrant clients getting mortgages that their down payment must be in the bank for at least 30 days before the closing date to comply with Canadian money laundering laws. If you’re not using a mortgage, those rules don’t apply, but Nicol says the money must be in your lawyer’s account on the closing date.
“Your lawyer needs a heads-up about where the funds are coming from to ensure they’ll be in place on the day of closing,” he says. “We can’t wait for a cheque to clear or anything like that.”
Shinners says the mortgage rules for new Canadians offers a great opportunity to put down roots early. “In Nova Scotia housing prices are less expensive. Generally, a lender would be looking at financing up to $600,000 if you’re looking at a 35-per-cent down payment. That can go a long way here.”
No matter how long you’ve been in Canada, there are additional costs to keep in mind when buying a home. Andrew Nicol, a real-estate lawyer at BoyneClarke, says these are some to watch:
Deed transfer tax: Each Nova Scotian municipality sets its own rate for this mandatory tax. HRM’s rate is 1.5 per cent, which means an extra $5,250 on a $350,000 home.
Legal fees: Your lawyer’s fees will generally run between $800 to $1,500. During your first meeting ask for a fee schedule so you can monitor this expense.
Property tax adjustment: HRM requires homeowners to pay property tax twice yearly, at the end of April and October. The buyer reimburses the seller for any property tax he paid after the closing date. The tax rate depends on the house’s assessed value and location. You’ll get an assessment in the mail in January, which you can appeal if you think it’s overvaluing your home.
Other adjustments: The seller fills the oil tank before the closing date, and the buyer repays the money through adjustments. Other adjustments could include pumping the septic tank and inspecting a well (if you don’t have municipal service), the lease transfer of a furnace, or other equipment.
The next two aren’t mandatory if you don’t have a bank mortgage, but Nicol encourages his clients to protect themselves with one or the other.
Location certificate: A surveyor visits the property and ensures it matches the boundaries set out in the deed. This means a neighbour can’t sue you in years to come because part of your home crosses his property line. It costs $500 to $700.
Title insurance: This is covers the homeowner for any title disputes that the location certificate would uncover. At $200 to $300 it’s more affordable that the other option. Nicol says most of his clients opt for title insurance.