If you want to buy a house in Canada, you probably have a lot of questions. For example, how do mortgages work there? What is your credit score, and how high should it be to buy a house? Who should you talk to about getting a loan? Is it going to be hard to buy a house in Canada?
We break down everything you need to know about how mortgages work, the different kinds of mortgages available, the credit score youll need and how to apply for a mortgage.
To buy a house in Canada, you’ll need a down payment unless you have enough cash on hand to pay for the whole thing at once. 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 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.
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.
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.
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.
A big step in life is buying a house, but the process can be scary, especially when it comes to mortgages and financing. “What credit score do I need to buy a house in Canada?” is a question that comes up a lot.
The answer isn’t straightforward as multiple factors determine mortgage eligibility. But your credit score plays a big role. Here’s what you need to know about credit scores and qualifying for a mortgage in Canada.
How Credit Scores Work in Canada
In Canada, credit scores range from 300 to 900, with higher scores indicating lower credit risk. Anything above 680 is considered good credit in Canada.
The two main credit bureaus that calculate credit scores in Canada are:
- Equifax
- TransUnion
Lenders use your credit score to assess your creditworthiness and determine:
- If you qualify for a mortgage
- What mortgage interest rate they’ll offer you
Why Your Credit Score Matters for a Mortgage
When you apply for a mortgage, lenders review your credit report and score to estimate your risk of defaulting on the loan.
Borrowers with higher credit scores are seen as lower risk and can qualify for:
- Lower interest rates, saving thousands over the mortgage term
- Larger loan amounts
- More flexible financing options
Conversely, a low credit score can lead to:
- Higher interest rates
- Lower mortgage amount approvals
- Difficulty getting approved at all
Even a small difference in your credit score can impact your mortgage rate. That’s why it’s important to check your credit score long before applying for a mortgage.
What is the Minimum Credit Score for a Mortgage in Canada?
The minimum credit score for a conventional mortgage from a major Canadian lender is 680.
However, aim for 720 or higher to increase your changes of getting approved and to access the best mortgage rates.
Here’s a quick overview of minimum scores by lender:
- Major banks: 680+
- Credit unions: 650+
- Alternative lenders: 600+
People with credit scores below 680 may still be able to get a loan if they make a bigger down payment or work with alternative or private lenders.
How to Check Your Credit Score in Canada
A soft credit check is an easy way to check your credit score that won’t hurt your credit. Here are some options:
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Get your free credit score through your bank. Customers can check their credit score for free at a lot of big banks, like Scotiabank.
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Use Credit Karma. They provide free Equifax scores.
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Check directly with credit bureaus. You can purchase your score directly from Equifax and TransUnion.
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Try a free trial of a credit monitoring service. Apps like Borrowell offer free trials for monitoring.
Check your score 6-12 months before applying for a mortgage to give yourself time to improve it.
How to Improve Your Credit Score Quickly
If your credit score falls below 680, take steps to improve it so you can get the best mortgage rates. Here are some tips:
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Pay all bills on time. Payment history makes up a big part of your score. Set up autopay if you tend to forget due dates.
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Pay down balances. Having maxed out cards or high utilization hurts your score. Pay down debts and keep balances low.
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Avoid applying for new credit in the months before your mortgage application. Too many hard inquiries can temporarily ding your score.
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Correct errors on your credit report. Dispute and fix mistakes by contacting the credit bureaus.
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Become an authorized user on someone else’s card to build positive payment history.
With diligence and time, it’s possible to improve your credit score significantly in under a year.
Other Factors Lenders Consider Besides Your Credit Score
While your credit score is important, lenders also look at other factors when reviewing mortgage applications, including:
- Down payment amount
- Debt-to-income ratio
- Income and employment
- Assets and savings
- Ongoing monthly expenses
- Results of mortgage stress test
Meeting these requirements along with an improved credit score can help offset a less-than-perfect score.
The Bottom Line
A credit score of at least 680 is recommended to qualify for a mortgage from a major Canadian lender and get the best interest rates. Scores above 720 are ideal.
Improving your credit score takes effort and time, so check it early. Then develop a plan to boost your score through on-time payments, lower credit usage, and correcting errors.
With a healthy credit score and other strong financial credentials, you’ll be in a great position to get approved for the mortgage you need to buy your dream home.
The average Canadian has a credit score of 667^. Want to see how you compare?
Fixed rate mortgages versus variable rate mortgages
In Canada, there are two main types of rates on mortgage loans: fixed and variable.
With a fixed rate mortgage, the interest rate and payment amount stay the same for a set amount of time.
The interest rate is locked in for the entire mortgage term. Monthly payments remain the same for the entire mortgage term.
Interest rates are often initially higher than a variable rate mortgage.
The interest rate changes based on market conditions and may fluctuate throughout your mortgage term.
These usually have lower initial interest rates than fixed-rate mortgages.
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. You will be charged fees if you pay off your mortgage before the end of the term if you have a closed term. An open term mortgage, on the other hand, lets you pay it off whenever you want without any fees.
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.
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 youll 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 youll pay less interest on the loan because its repaid sooner.
What do you need to apply for a mortgage?
Youll 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.
Its also a good idea to apply for a pre-approval before starting to search for a home to ensure that youre 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, youll 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 arent 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 youre 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 whos 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.
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 youll 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 youre a Scotiabank customer, you can easily get your free credit score from TransUnion4 on the Scotia mobile app.
What credit score do you need to buy a house?
FAQ
What credit score do you need to buy a house in Canada?
The minimum credit score to be approved for a traditional mortgage is around 680. People with lower credit scores may still be able to get a mortgage, but they might have to look outside of Canada’s “Big Six” banks.
Can I get a mortgage with a 600 credit score in Canada?
Those with a credit score of 600 would generally be considered “non-prime. ” Folks in this category are not able to access the attractive mortgage rates you ….
Can I get a house with a 700 credit score?
How to get 900 credit score?