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If buying a home in Canada is one of your goals, you probably have a lot of questions about the process: How do mortgages work in Canada? What's your credit score, and how high should it be to buy a house? Who should you talk to about getting a loan? Will it be hard to buy a home in Canada?
We break down everything you need to know about how mortgages work, the different kinds of mortgages available, the credit score you'll need and how to apply for a mortgage.
Down payments in Canada
Unless you’ve saved up the money to pay the entire purchase price outright, you’ll need a down payment to buy a home in Canada. A down payment is the amount of money you pay up front to reduce the amount of money you must borrow through a mortgage loan.
The amount of down payment you need depends on the home's purchase price:
The minimum down payment requirements were recently changed as part of the federal government’s mortgage reform plan and are set to go into effect by Dec. 15, 2024. Before that date, anyone purchasing a home for more than $1 million needed to put down a minimum of 20% to qualify for an uninsured mortgage. Now, the cap is $1.5 million, effectively lowering the down payment for buyers in this price range.
Up to and including $500,000
Down payment required: 5%
If you’re buying a home with a purchase price up to $500,000, you can pay as little as 5% upfront. But if your down payment is less than 20%, you’ll need to pay for mortgage default insurance.1
More than $500,000 and less than $1,500,000
Down payment required: 5% on the first $500,000 10% of the amount over $500,000.
For homes with a purchase price that is more than $500,000 and less than $1,500,000, you will need a down payment of 5% on the first $500,000 plus 10% of the remaining amount. If you don’t have 20% of the down payment, you’ll need mortgage default insurance.
$1.5 million and above
Down payment required: 20%
For properties with a purchase price of $1.5 million or more, you’ll need a down payment of 20%.
Mortgage lenders will either bill you directly for default insurance or add the cost onto your mortgage balance.
How do 20% down payments vs. minimum down payments compare (for homes under $1.5 million)? Here’s some examples on how much you’ll need to save for your future home depending on if you are aiming to save the minimum down payment or a 20% downpayment.
Purchase price |
Minimum down payment |
Down payment at 20% |
Difference |
|---|---|---|---|
$800,000 |
$55,000 |
$160,000 |
$105,000 |
$900,000 |
$65,000 |
$180,000 |
$115,000 |
$1,000,000 |
$75,000 |
$200,000 |
$125,000 |
$1,100,000 |
$85,000 |
$220,000 |
$135,000 |
$1,200,000 |
$95,000 |
$240,000 |
$145,000 |
$1,300,000 |
$105,000 |
$260,000 |
$155,000 |
$1,400,000 |
$115,000 |
$280,000 |
$165,000 |
Average amount you’ll need for a down payment by province
Home prices vary depending on where you live in Canada. The higher the average home price, the more you can expect to put down.
Province |
Average cost of a home2 |
Minimum down payment |
20% down payment |
|---|---|---|---|
Alberta |
$491,937 |
$24,596 |
$98,387 |
British Columbia |
$948,266 |
$69,826 |
$189,653 |
Manitoba |
$362,137 |
$18,106 |
$72,427 |
New Brunswick |
$309,600 |
$15,480 |
$61,920 |
Newfoundland and Labrador |
$306,000 |
$15,300 |
$61,200 |
Northwest Territories |
$478,350 |
$23,917 |
$95,670 |
Nova Scotia |
$410,900 |
$20,545 |
$82,180 |
Ontario |
$851,478 |
$60,147 |
$170,296 |
Prince Edward Island |
$372,200 |
$18,610 |
$74,440 |
Quebec |
$538,190 |
$28,819 |
$107,638 |
Saskatchewan |
$343,800 |
$17,190 |
$68,760 |
Yukon |
$606,091 |
$35,609 |
$121,218 |
What is the minimum credit score to buy a house in Canada?
In Canada, credit scores range from 300 to 900. The higher your credit score, the more options lenders can offer in terms of mortgage products and interest rates. If you’re asking, “Can I buy a house with a 648 credit score”, the short answer is probably not. You’ll need at least a minimum credit score of 680.
If your credit score is too low to qualify for a mortgage, there are strategies for how to improve your credit score.
One option is to start building a credit history by getting a credit card and making all your payments on time. This is also a good strategy if you’re new to Canada and looking to build your credit history. Scotiabank offers credit cards to newcomers with little or no credit history as part of the StartRight program.3
How to qualify for the best mortgage rates
Your mortgage rate influences your monthly payment and how much interest you'll pay over the life of the loan, which makes it important to lock in the best rate possible.
Your credit score is one of the key factors in determining your loan’s interest rate. Before applying for a mortgage, work on improving your credit score. A higher score may help lower your interest rate — and even a difference of a few percentage points in your interest rate can make a significant difference over the life of your loan. A lower interest rate could also offer you more purchasing power to help you buy the home of your dreams. If you're a Scotiabank customer, you can easily get your free credit score from TransUnion4 on the Scotia mobile app.
Fixed rate mortgages versus variable rate mortgages
In Canada, there are two main types of rates on mortgage loans: fixed and variable.
Fixed rate mortgages
A fixed rate mortgage is where the rate of interest and payment amount are fixed for a specific term.
Pros
The interest rate is locked in for the entire mortgage term. Monthly payments remain the same for the entire mortgage term.
Cons
Interest rates are often initially higher than a variable rate mortgage.
Variable rate mortgages
The interest rate changes based on market conditions and may fluctuate throughout your mortgage term.
Pros
These usually have lower initial interest rates than fixed-rate mortgages.
Cons
Monthly payments could go up (or down) over the term of your loan, making it harder to anticipate your expenses.
What are mortgage terms?
In Canada, you can choose a closed or open mortgage term. With a closed term, prepayment charges apply if you decide to repay the mortgage before the end of the term. In contrast, an open term mortgage allows you to repay the mortgage at any time with no prepayment penalties.
After choosing between an open or closed term, you need to decide on the length of the term. Terms range from two years, three years, five years or more, depending on the mortgage lender. A five-year fixed rate mortgage is the most popular mortgage term in Canada.5
Once your mortgage term ends, , you can renegotiate the rate with the bank or to move to another lender.
Amortization period
The amortization period and the loan term are typically different. An amortization period is the period in which it will take you to pay off your complete mortgage debt (including interest) based on regular payments assuming a certain interest rate.
Common amortization periods in Canada are 10, 20 and 25 years, but can go up to 30 years. Previously, the maximum amortization period for anyone without a 20% down payment was 25 years. As part of the federal government’s mortgage reform plan, first-time home buyers and those purchasing a new build qualify for a 30-year mortgage, which can lower monthly payments.
The longer the amortization period, the lower your monthly payments, but you'll also pay more interest on the loan because the repayment period is longer. Your monthly payments will be higher if you choose a shorter amortization period, but you'll pay less interest on the loan because it's repaid sooner.
What do you need to apply for a mortgage?
You'll need some basic information to complete a mortgage application, including:
- Identification
- Proof of employment
- Copies of your most recent tax returns
- Details about existing debt
- A list of assets
A Scotiabank home financing advisor can help you compare different types of mortgages and rates, and monthly payment options.
It's also a good idea to apply for a pre-approval before starting to search for a home to ensure that you're shopping for homes in your budget.
Optional mortgage insurance products
Many lenders offer optional creditor insurance protection; this coverage can help to keep up with mortgage payments or pay off the balance of the loan if certain unexpected life events, such as disability or critical illness occur.
Closing costs, taxes and other costs
In addition to budgeting for a down payment, you'll also need to budget for other expenses, such as GST or HST on new home purchases, land transfer taxes and property taxes.
If you are new to Canada and aren't a permanent resident or provincial nominee in Canada, you may also need to pay a foreign buyer tax.
Other fees associated with buying a home include closing costs that cover legal fees, inspections and other costs. Remember that condos also often charge monthly management or maintenance fees.
Get help from trustworthy experts
When you're ready to apply for a mortgage, be sure to work with a reputable lender. Contact a mortgage specialist associated with an established company — and never share your social insurance number (SIN) with anyone who may not be legitimate.
Look for a lender who's eager to educate you about the home buying process and wants to create a long-term relationship. They’ll help you research your options to find the best mortgage for you.
If you’re new to Canada, for example, you might consider the Scotiabank StartRight mortgage program. Once you’re ready to discuss the latest mortgage product and information, you can book an appointment with an advisor—or, at Scotiabank, a mobile home financing advisor can meet you at a convenient location to discuss your borrowing options.
Your TransUnion Credit Score and other TransUnion Credit Score services are provided by TransUnion Interactive, Inc. ("TransUnion") and are made available to you as a customer of The Bank of Nova Scotia (“Scotiabank”) at no additional charge. Accessing your TransUnion Credit Score will not impact your Credit Score. Scotiabank and its affiliates are not responsible for the TransUnion Credit Score or any of the information provided to you through TransUnion's Credit Score services.
To access your TransUnion Credit Score, Scotiabank will share your personal information such as name, address and date of birth with TransUnion so that TransUnion can identify you and provide your Credit Score. Your information will not be used or disclosed by TransUnion for any other purposes.
The TransUnion Credit Score service is subject to certain terms and conditions that can be viewed here Terms of Use.
