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Are you currently living in Canada?

When searching for your first home, here are five tips to ensure you get the best mortgage rates in Canada. And, to get the best rates will require you to research so you know how to select a mortgage that’s right for you. Many newcomers arrive with savings to own a home and establish roots in Canada. And getting the best mortgage rate can save you thousands of dollars over the course of your mortgage.

Buying your first home in Canada is an exciting time to make your dream of homeownership a reality.  But at the same time, it can create stress and confusion. You may have questions about the real estate process in Canada, the lending process, or other important questions. And, buying a home is likely the largest and most important decision that you will make. So, it’s important to understand what’s involved, and how you can save thousands of dollars with the best mortgage rate.

5 Mortgage Rate Tips

Tip 1. Do Your Research

A home purchase is a major investment. So, research the housing market in Canada and the lending and real estate process. Do your research so that you’re confident with the decisions you’ll have to make every step of the way. And, this includes understanding the different types of mortgages:

Tip 2. Save for Your Down Payment to Get the Best Mortgage Rate

Your down payment is money you pay towards your home purchase. It is deducted from the purchase price of your home. And, the remaining amount will be covered by your mortgage loan.

A 2019 survey conducted by Royal LePage revealed that 75% of newcomers arrive in Canada with savings to purchase a home. And the great news is that those savings can help you to get the best mortgage rate.

You can get a conventional mortgage loan if you can pay 20% or more of the property value. But, with less than 20% of your down payment, you’ll get a high-ratio mortgage. And, high-ratio mortgages require home buyers to purchase mortgage default insurance.

This mortgage insurance allows homebuyers to buy a home with less than a 20% down payment of the purchase price. However, mortgage insurance only protects your lender. Therefore, it’s important to understand the terms and conditions of mortgage insurance if you’re unable to pay your mortgage.

Homebuyers require a minimum down payment of 5% of the home purchase price. So, if you have less than 5%, keep saving!

When you have a bigger down payment it can save you money over the lifetime of your mortgage. But, if you have less than 20% of the purchase price, your lender will require you to pay for mortgage insurance.

Tip 3. Improve Your Credit Score

There’s nothing like a poor credit score to stand in the way of getting the best mortgage rates in Canada. The minimum required credit score to get a mortgage in Canada is between 620 – 679. But, with a good credit score (usually between 680 – 724 points), you may get better borrowing rates.

Although, even with a good credit score, it’s smart to practice good financial habits to increase your ability to borrow money. For example:

Tip 4. Get Professional Advice about Mortgage Rates

If you’re a first-time homebuyer, working with a mortgage broker can help you navigate the complexity of mortgage products, options, and features. A mortgage broker can access a broad range of financing options.

Buying your first home in Canada can come with uncertainty about unexpected costs, affordability, or paying too much for your home. And, you’ll likely have questions that a mortgage broker can answer.

A professional mortgage broker can inform you about mortgage options and features. Because different mortgage options may be more suitable for you based on your needs and plans. For example, you will need this information to help you make decisions related to:

In addition to knowledge and experience, mortgage brokers can:

Lenders may have important restrictions related to each mortgage option which can cost you more money. Working with a mortgage broker can save you thousands of dollars in costs.

Tip 5. Get Pre-approved for a Mortgage

When searching for your new home, it’s difficult to predict if mortgage rates will increase or decrease. So, a pre-approved mortgage can protect you against interest rate hikes while you search. With a pre-approved mortgage, you can lock in a mortgage rate for up to 120 days. In addition, getting pre-approved will help you understand how much you can afford to buy your first house in Canada.

Female mortgage broker showing a young couple a presentation on a laptop computer.
Mortgage brokers work on your behalf to get the best possible rate.

Do I Need a Mortgage Broker?

You can get a mortgage from your bank or a mortgage broker. However, working with a broker who is a subject matter expert with specialized mortgage knowledge can offer several advantages. For example, you can:

A broker works with several lenders including top banks, credit unions, and other lenders to get you a more flexible deal. And with one single mortgage application, they get several lenders to “bid” for your business to get you the best possible rate.

In addition, a mortgage broker acts as a single point of contact who can manage everything from applying for the mortgage to negotiating your rate and disbursing the funds. All of this can create a stress-free experience, especially if you’re unfamiliar with the process.

Key Takeaways:

Establishing roots in Canada through home ownership is exciting! Achieve your dream with the best mortgage rate to save you thousands of dollars for your mortgage.

For newcomers, it’s not uncommon to face an uncertain financial situation in your first few years. An emergency fund can help you meet unexpected costs, manage expenses while searching for employment, or stay afloat if you face a job loss. Unexpected expenses can arise at any time, anywhere to anyone. Those who are prepared will walk out without bearing too much harm to their financial health. A good way to make sure you can survive a financial crisis is to save money for an emergency fund. This article covers the different types of emergency funds and how you can save money for each fund. 

What is an emergency fund?

An emergency fund is a pool of cash that is set aside to be used in the case of an emergency. It should be stored completely away from your checking/saving accounts to ensure that you are not tempted to use it for daily expenses.

The purpose of an emergency fund is to keep you financially secure. When an unexpected expense arrives or you lose your job, this fund will help you cover expenses. Your fund could be used for emergencies such as:

  1. Urgent medical, dental, or vet bills
  2. Critical home repairs (i.e. a leaky roof)
  3. Replacements for an essential major appliance (i.e. refrigerator or stove).

That is why it is important to have at least three to six months of living expenses in your emergency fund. This type of fund is called a traditional emergency fund. However, it is not the only type of emergency fund that will help you.

Different types of emergency funds

Emergency funds are a very important asset to have because they can help you get through a financial crisis without bringing much harm to your financial health. Even so, a traditional emergency fund can take years of saving money to build. Fortunately, there are many types of emergency funds, some of which are easier to save money for. Let’s take a look at three different types of funds:

1. A traditional emergency fund

2. Stash of Cash (having cash on hand)

3. Passive income.

Traditional emergency fund

A traditional emergency fund is the biggest fund on this list. Because of this, it can take years to save up money to build a traditional emergency fund. Generally, a traditional emergency fund should cover three to six months of your income. This means that if you lose your job, you will have enough money in your emergency fund to pay all the bills for several months. 

A traditional emergency fund can also be used for things such as health emergencies, auto and home repairs, and any essential need that requires a large amount of money immediately. 

Stash of cash

A stash of cash isn’t a big emergency fund and it is easy to save up money for one. This type of emergency fund can come in handy during a natural disaster or a power outage. Basically, you need cash in any situation when you can’t withdraw money from an ATM. Your stash of cash could be anywhere between $500 to $1500. It should be enough to pay your expenses for a week when an ATM is inaccessible. 

The biggest concern about keeping money at home is safety. Some argue that it is unsafe to have that much money in your home. This challenge can be overcome by hiding that money in a place that is easily accessible, but hard to find. Just make sure it is nothing too obvious like a money pouch or a wallet. 

Most burglaries happen very quickly so hiding your stash of cash in a good place is enough to keep your money hidden. If you are still concerned about safety, you can buy a money safe or locker to hide your money.

Passive income

This third type of emergency fund isn’t even a fund at all. However, during a financial crisis, passive income can prove to be very beneficial. This strategy is also used by countries to avoid a nationwide financial crisis. The main idea here is to diversify your income. Here is how it works:

Most of us have one job that we rely on to pay all of our expenses. But what if you lost that job? How will you pay the bills? To avoid this, you can diversify your income. Simply put, you should find other ways to make money so that you will still have a flow of income that you can rely on to pay the bills if you lose your main job.

You can make passive income in many ways. Some common ways to make passive income are:

  1. Buying and selling used items on sites like Kijiji or Facebook Marketplace
  2. Fixing broken items and then reselling them
  3. Freelancing
  4. Starting a dropshipping store (e-commerce)
  5. Creating a course
  6. Creating a blog.

These are just a few ways to make passive income. There are countless other ways you can make extra money. You can also be a little creative and think of your own way to make money on the side. Overall, your objective should be to diversify your income source so that you can rely on other sources of income during a financial crisis.

Even when there is no emergency, passive income will help you save for your emergency fund and overall, have a higher household income. This will not only help you be financially secure but it will also help you grow financially.

One of the first things new immigrants want to establish when they move to Canada is somewhere they can call home. Your ability to buy a home and qualify for a mortgage is tied together if you do not have the funds to purchase a property outright. 

You will need to meet certain financial criteria as set out by Canadian banks and financial institutions. This may seem intimidating and even challenging, largely because of misconceptions. 

There is a belief that newcomers cannot get a mortgage from a Canadian bank, they won’t qualify if they don’t have a strong credit history or they won’t qualify until they have a couple of years of employment history in Canada. These are not true. 

There are many immigrants who qualify for mortgages every day. In fact, did you know that 18% of mortgage consumers are newcomers to Canada? 

Requirements for Newcomers to Qualify for a Mortgage

Financing is available to both permanent and non-permanent residents. However, qualifying for a mortgage will depend on your status. Here is an overview of mortgage requirements:

Permanent Resident Mortgage Requirements

As a permanent resident, you will have access to a variety of mortgages and programs. You could qualify for a standard mortgage if you have a good credit rating. This means one of the applicants must have a credit score of 680 or higher. You will also require at least a 5% down payment. 

If you do not have a good credit score, you can still qualify for a mortgage through a newcomer to Canada program. You will still require a minimum 5% down payment. 

If you are paying less than 20% of the cost of the purchase price, you will have to get mortgage loan insurance. 

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Non-Permanent Resident Mortgage Requirements

As a non-permanent resident, you have specific requirements to qualify for a mortgage. For example, you must:

With a good credit rating, you could qualify for a standard mortgage. If you do not have established credit in Canada, you may have to get a letter of reference from your financial institution from your country of origin. You will need to qualify under a new to Canada program. 

You will not qualify for a mortgage if you are not a permanent resident, have poor credit, and do not have at least a 10% down payment. 

What Lenders Review When Qualifying for a Mortgage

Your Income:

When applying for a mortgage, a lender will review your income. This can be from many sources as long as the income is plausible, such as income from full or part-time employment, self-employment, rental properties, support or alimony payments, or pensions.

The lender will require a letter from your full or part-time employer to confirm income, especially if you have had the job for less than two years. You should have copies of your last two year’s tax returns and be up-to-date with any outstanding taxes.

Your Debt:

The lender will also look at your debts, including your proposed house payment, as well as monthly payments for loans, credit cards, car leases or child support. It is important that you include all debts you have on your mortgage application as they can impact your ability to borrow.

Your Employment History:

Evidence of regular income is another critical factor lenders consider. They are more inclined to favor applicants who have worked at one job continuously for several years or have remained in the same field. However, you can still qualify for a mortgage if you’ve changed jobs recently as long as your new employer can prove your income with a Letter of Employment to confirm your:

They may also ask for recent pay stubs to confirm your rate of pay.

If you’re self-employed or have worked at a job for less than two years, lenders may ask for additional information, such as federal income tax statements, to verify your income.

Your Credit History:

To qualify for a mortgage, a good credit rating is essential. In addition to reviewing your debt and income, a lender will also pull your credit report. The report details your payment history and how you’ve handled your past obligations. You can get a copy of your credit report before you apply for a mortgage to veryify its accuracy or correct any errors before you apply for a mortgage. However, each credit “pull” will negatively impact your credit score for a short period of time, so avoid pulling your credit too often.

Tips To Qualify for a Mortgage In Canada

Qualifying for a mortgage ensures that you meet certain criteria set out by lenders. Here are the main steps you will need to take to qualify:

Save for a Down Payment to Qualify for a Mortgage:

You will have to put money down on any mortgage. The more you save, the better position you will be in to qualify for a mortgage. 

Establish Credit in Canada:

As soon as you arrive in Canada, its important to start building your credit history. A strong score will not only help you qualify for a mortgage, but it will also help you get a better rate. You can do this by paying your bills in full each month, use and pay off your credit cards, and maintain a consistent source of employment income. 

Have Proof of your Financial Situation to Qualify for a Mortgage:

Lenders want to see proof of a stable financial situation. To do this, you can get a letter of reference from your financial institution, an employment letter from your employers, and show copies of recent pay stubs. 

Shop Around:

There are plenty of mortgage options. You can choose from traditional banks, to credit unions, and private lenders. You can also enlist the services of a mortgage broker to help you qualify. Brokers work for you, and they will shop around and compare options for you. They can be a big help to find the right mortgage for your specific needs. 

Getting a Pre-approved Mortgage? 4 Tips to Consider

A pre-approved mortgage indicates how how much mortgage you can afford and guarantees a mortgage rate (usually for 90 – 120 days) while you look for a home.

A pre-approved mortgage can give you more credibility to sellers and real estate agents, And in bidding wars, common in hot housing markets, it can give you an advantage against competing home buyers. However, be sure to consider these tips:

1. Know the Difference: Pre-qualified versus Pre-approved


Understand the difference between pre-qualification and pre-approval. For example, pre-qualification is less formal and confirms that you meet general lending guidelines. And sometimes you can obtain a pre-qualification over the phone or through an online assessment.

On the other hand, a pre-approval is a detailed process and takes more time to complete. You need to complete a mortgage application and provide documents to verify things such as your income, debt, employment, and credit history.

A lender will review your application before they pre-approve you.

2. Watch Your Finances after Pre-approval


Don’t let your guard down after you get pre-approved for a mortgage. Missing or skipping credit card payments, increasing debt, or changing jobs could void your pre-approval.

3. Reset Pre-approval Rates


If rates remain low and you’re still searching for a home, you can reset your pre-approval every 45-75 days. Doing so will not only extend your rate hold but will safeguard you against any mortgage rate hikes before you close. Although, some lenders may restrict rate resets.

4. Know the Pre-approval Terms


Shop around and choose pre-approval terms that offer you the most benefits. For example, opt for the longest rate hold (120 days), and other mortgage features such as the ability to make prepayments, fair penalties, and refinancing options.

Qualifying for a mortgage can be an intimidating process, but it does not have to be this way. There are countless ways for newcomers to get approved for a mortgage. It happens every day. You just need to know the steps and understand the financial criteria you need to meet to qualify. Start working toward qualifying from the day you move to Canada, and you will be a homeowner sooner than you think.


For more information about your financial first steps in Canada, visit our banking in Canada resource page. Get the essential information you need to manage your finances in Canada!

what mortgage can I afford

The question “how much mortgage can I afford?” is quite different from “how much mortgage can I get?” So, it’s important to understand the risks involved when a lender offers you a mortgage that is more than you need or expected. When buying a home for the first time, it’s important to consider all of the related costs and expenses. And, when you factor in all of the costs, you’ll be in a better position to answer, “how much mortgage can I afford?”

It may seem like great news to get approved for a higher mortgage amount than you expect. But, this can lead to overspending on housing when you get more money than you need.

The Key Question: How Much Mortgage Can I Afford?

Buying a home in Canada is a big dream for many newcomers! But, buying a home that is more than you can afford, can turn that dream into a financial nightmare. If you have a good credit history, and a healthy down payment, your lender may approve you for a mortgage that is higher than what you need.  For example, you may have a personal budget of $800,000 to buy your home. And, your lender may pre-approve you for $1,000.000. To get a general idea of how much mortgage you can afford, use this mortgage calculator.

But, does that mean you should borrow that much so you can buy a more expensive home?  You need to factor in other costs so that you can answer this key question: how much mortgage can I afford?

This is a common mistake that many first-time homebuyers make. And, this often leads homeowners to a situation where they are “house rich and cash poor”. In other words, they are spending between 30 – 40% (or more) of their total income on:

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When you spend too much of your income on housing, it means you’ll be “cash poor”.  And this means you’ll have very little room to afford other expenses such as: 

Or, you end up making these purchases on credit, increasing your debt level, and possibly affecting your credit history.

buying a home and decorating

In addition, you need to consider your other expenses such as daycare, saving for retirement, or saving for your children’s education. All important expenses that you may also be saving for.

So, before buying your home, carefully consider how much you can afford and what other financial obligations you have.

Costs to Include When Asking: How Much Mortgage Can I Afford?

Closing costs are typically paid at the end of the homebuying process. Often, people overlook the closing cost that can become expensive. You can expect to pay closing costs in the range of 1.5 – 4 % of the selling price of your home. So, it’s important to include these costs when calculating how much mortgage you can afford.

Closing costs are one-time only expenses that may include:

Home Inspection Fee:

Getting a home inspection is not required. However, if you are buying a home, it may be a smart thing to consider. A home inspection can provide you with information about the state of the house. You may discover that you will have to spend money on repairs either in the short-term or long-term. 

You also want to find out what recent repairs or renovations were completed. A home inspection can provide information about the: insulation; electrical work; and structure.

If the home inspection reveals costly defects, you can try to negotiate with the seller to make the repairs or reduce the selling price.

Property Taxes: 

Homeowners in Canada must pay taxes to fund services such as police and fire, schools, public education, transit, parks and recreation, road maintenance, and many other services. And, property taxes are a major source of revenue for municipalities in Canada.

On top of your mortgage payments, you will have to pay property taxes. Most lenders will collect the property tax and this helps you to avoid a large and unexpected tax bill when your annual taxes are due. So, it’s important to factor your property taxes into your mortgage payments as well.

These legal costs include fees for services that your real estate lawyer will do such as:

Land Transfer Fee:

This is a tax that home buyers in most provinces must pay. And, It is usually based on the purchase price of the home.

Property Insurance

Since your lender has a large stake in your home, they will often require you to purchase insurance against fire and weather-related damage. It is also a good idea for you to purchase ‘contents’ insurance to protect your valuables.

Mortgage Life Insurance

This is special insurance coverage to cover the cost of your mortgage in the event of death or severe illness is available from most lenders.

Moving Costs:

Your moving costs will vary depending on whether you rent a truck and move your belongings yourself, or if your hire professional movers. If you hire movers, you can expect to pay a minimum of $1,000 depending on the weight of your belongings, travel distance, and even your moving date.

You can reduce your moving costs if you rent a truck, and kindly ask your friends and family to lend you a hand on moving day!

Utility Bills: 

When you set up your utilities, you will be charged a deposit to hook up services and replace the previous owner’s name with your name on the bill.

Many potential homeowners overlook these additional costs, and they can quickly add up. So it’s important to include these costs when considering how much mortgage you can afford.

Key Takeaways from How Much Mortgage Can I Afford?

It’s important to manage all of the costs involved when buying a home. And, knowing how much mortgage you can afford can help you to make the best financial decision for you and your family.

Check out our financial first steps resource page for resources and information to help you achieve your financial goals in Canada!