Buying a Home in Canada as a Newcomer: Mortgages & Down Payment

Can newcomers and PRs buy a home? The foreign-buyer ban explained

Permanent residents and Canadian citizens are not restricted by the foreign-buyer ban and can buy residential property like anyone else. The restriction targets people who are not citizens or permanent residents. Under the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which the federal government extended so that it currently applies until January 1, 2027, certain non-Canadians are temporarily prohibited from buying some residential property. Because this is a temporary measure that has already been extended once, you should confirm its current status and expiry on official sources before relying on it.

There are several exceptions. Permanent residents are exempt. Many work-permit holders are also exempt: under the current regulations a person authorized to work in Canada can generally buy if their work permit or authorization has at least 183 days of validity remaining at the time of purchase. International students may be eligible to buy if they meet specific conditions, and protected persons and certain refugee claimants are also exempt. The exact conditions have been amended since the ban began, so the precise tests can change.

The ban also has limits on what and where it applies. It generally covers residential property with three dwelling units or fewer, including detached houses, semi-detached houses, and condominium units, and it has applied mainly within larger urban areas (Census Metropolitan Areas and Census Agglomerations) rather than smaller or rural communities. What this means for you: if you are a PR, the ban is usually not a concern, but if you are on a work permit or study permit, check whether you meet an exception and whether the property and location are covered before you make an offer. Penalties for a prohibited purchase can be significant, so this is an area to verify carefully or get professional advice on.

How much down payment you need

Canada sets a minimum down payment that increases with the price of the home. As a general rule, you need at least 5 percent on the portion of the price up to $500,000, at least 10 percent on the portion between $500,000 and the insurable cap, and 20 percent or more once the price is above that cap. In practice, that means a $400,000 home needs about $20,000 down, while a $700,000 home needs $25,000 (5 percent of the first $500,000) plus $20,000 (10 percent of the next $200,000), for a $45,000 minimum.

The cap matters because mortgage default insurance is only available below it. The federal government raised the price ceiling for insured mortgages, and government-backed insurance is generally not available for homes at or above the cap, where a down payment of 20 percent or more is typically required. Some elements, such as the exact cap and whether the higher limit applies to first-time buyers and new construction versus repeat buyers, have changed recently, so confirm the current numbers before you plan around them.

If your down payment is less than 20 percent, your mortgage usually must carry default insurance (often through CMHC or a private insurer such as Sagen or Canada Guaranty). This insurance protects the lender, not you, and the premium is added to your mortgage and paid off over time. A larger down payment lowers or removes this premium and reduces the amount you borrow, but it is not the only cost to plan for, as the next sections explain.

Newcomer mortgage programs and qualifying without Canadian credit

Lenders normally look at your Canadian credit history to approve a mortgage, which is a challenge if you have just arrived. To address this, Canada's major banks and some other lenders offer newcomer mortgage programs designed for permanent residents and many work-permit holders who have limited or no Canadian credit history. These programs may accept alternative documents in place of a domestic credit score, and some can consider a foreign credit report, though terms and eligibility differ by lender.

Common expectations under these programs include proof of immigration status (such as a PR card or a valid work permit), proof of employment and income, and often a short period of Canadian employment, commonly around three months, although some lenders are more flexible and others stricter. You may be asked for extra documentation such as bank statements, a reference letter from a previous bank abroad, proof of your down payment and that it has been in your account for a period of time, and rental payment history. Mortgage default insurers also run newcomer programs that lenders use, which is part of how a newcomer can qualify with as little as 5 percent down.

What this means for you: shop around, because programs, rates, and required documents vary between lenders, and a mortgage broker can compare several at once. Building a Canadian credit history early, even with a secured credit card or a small account, can widen your options over time. None of this guarantees approval; each lender sets its own rules and makes its own decision.

Land transfer tax, rebates, and closing costs

On top of the down payment, buyers pay closing costs, and one of the largest is land transfer tax (sometimes called property transfer tax). This is charged by the province, and in some cities (for example Toronto) there is an additional municipal land transfer tax on top of the provincial one. The rate and structure vary widely by province, and a few provinces do not charge it at all, so the amount can range from nothing to several thousand dollars or more depending on where you buy and the price.

Many provinces offer a first-time home buyer rebate or exemption that can reduce or eliminate this tax up to certain price limits, and some have a federal rebate on GST/HST for newly built homes. Eligibility rules differ, and some rebates require that you be a Canadian citizen or permanent resident, which can affect newcomers on temporary status, so check the specific rules in your province and city. Because these thresholds and amounts are updated from time to time, confirm the current figures with the provincial or municipal authority.

Beyond land transfer tax, budget for other closing costs that commonly include legal or notary fees, a home inspection, title insurance, an appraisal, property tax and utility adjustments, and any mortgage default insurance premium and the sales tax on that premium. A common rule of thumb is to set aside roughly 1.5 to 4 percent of the purchase price for closing costs, but the real figure depends on your province and situation. This guide is general educational information, not financial, tax, or legal advice; for your specific purchase, consider speaking with a licensed mortgage professional, a real estate lawyer or notary, and a qualified tax advisor.

Frequently Asked Questions