But, although you probably know you need life insurance, you may be struggling to figure out what kind of life insurance to get and how much you need.

How much life insurance do I need?

How much life insurance you need depends on various factors. How much you need will likely differ from others. If you’re trying to figure out an exact number, consider the following:

Start with your net income

Take your annual net income (or after-tax income) and multiply it by the number of years you’d like to be able to replace that income if anything should happen to you. As a rule of thumb, you should probably be able to provide a minimum of five to seven years of annual income to your beneficiaries.

Ask yourself who relies on you?

Ask yourself the following questions: Do you have a partner or spouse? Children? If so, how old are they and how many do you have? What are your dreams for their future? For example, do you want them to have the opportunity to attend university or college? Do you want them to remain in the same home? Is it important to you that your family continues to enjoy life’s little pleasures, such as yearly family vacations? The more people who depend on you, the more coverage you need.

Don’t discount non-monetary contributions

If you are not the main breadwinner in the family, you may believe only your spouse needs to have life insurance. But, consider this: if you are the primary caregiver for your children or other dependents, your labour would have to be replaced if you died. Ask yourself how much it would cost your spouse in childcare, housekeeping services and meal prep if you weren’t around. Then insure accordingly.

Tally your debts

Do you have a hefty mortgage, a lingering student loan, car loans or credit card bills? If so, tally them up. You will want to ensure your spouse or partner can pay off those debts if you die. Having cash to pay off the mortgage could ensure your spouse can keep your children in their home rather than selling it.

Subtract any life insurance you already have

Many people have mortgage life insurance or get some group insurance coverage through work (often worth one to three times their annual salary). If you’re not sure whether or how much life insurance you have through work, talk to your HR department. Then subtract that sum from the total amount of life insurance you need.  

Subtract your savings and investments

If you have sizeable savings and investments, you may need less insurance. For example, let’s say you have $200,000 in a high-interest savings account. Since that amount is liquid, your loved ones will already have funds to draw upon if you were to suddenly pass.

Life insurance example

If you’re still feeling baffled, take the following example as your model and do your own calculation. Let’s say you are a couple aged 35 and 36. You both work, and you have two children. Your four main life insurance goals include the following:

• Goal #1: You want to have $10,000 set aside for a funeral in the event one partner should die.
• Goal #2: You want to be able to pay off your $400,000 mortgage.
• Goal #3:  You want to be able to cover post-secondary education for your two children when the time comes.
• Goal #4: You want to be able to replace $70,000 in annual after-tax income for seven years.

What assets do you already have? In this case, we will assume that you have:

• $100,000 in life insurance through your workplace
• $30,000 in shared RRSP savings

What is the coverage shortfall? Your total life insurance needs would be approximately $973,000. If you subtract the $130,000 in assets you already have, you’re left with a coverage shortfall of about $843,000. At the bare minimum, you’ll want to get coverage for that amount, but some people may want more.

What is life insurance?

Think of life insurance as a way to protect your family’s financial security. You pay a monthly premium, with the guarantee that, if you die, your family will receive a one-time cash payment to help them with the cost of living and raising a family.

When you take out a policy, you and your insurer agree on the amount of the premiums owing (your monthly payments), the time frame of the agreement (how long you will be covered), and the amount of pay-out in the event of your death.

You can get optional riders that adjust coverage to fit your needs. For example, you might choose a rider that lets you defer paying premiums if you become disabled, or that gives you more coverage later in life without a medical exam.

Term life insurance

Term life insurance is the simplest form of life insurance and often the most cost-effective for young families. Basically, you agree to pay premiums for a specific term (usually 10, 15 or 20 years). The insurer agrees to pay out a lump sum if you die before the term is up.

Term life premiums are based on three things: your age, health, and life expectancy. In some cases, you may have to undergo a medical exam. Term policies are usually the cheapest way to get a lot of life insurance coverage, but they tend to go up in cost as you age.

Whole life insurance

Whole life (or universal insurance) combines insurance coverage with a savings vehicle. The monthly premiums are higher, but the policy is meant to be renewed for as long as you live, and it grows in value as time goes on. As a policyholder, you can make withdrawals from the policy for any purpose.

On the plus side, over time, the cash value growth in your policy may be enough to cover your premiums. There are also several tax benefits to whole life policies, such as tax-deferred cash value growth and tax-free access to the cash portion.

On the minus side, whole life carries higher monthly premiums and the growth rate of the policy’s cash value generally doesn’t compare well to investments such as mutual funds and exchange-traded funds (ETFs). Administrative fees can also cut into the rate of return. As a rule of thumb, most advisors suggest buying term insurance and investing the difference.

When should I get life insurance?

There’s no hard and fast rule, but most people begin to think about getting life insurance when their lives change and they realize others are counting on them financially. The most common include:

• When you’ve just tied the knot – You owe it to your spouse to think about what would happen if one of you should die. If you own nothing and have no children, this is probably less crucial, but if you are the sole breadwinner or have taken on debts and other financial burdens, you need to think about what would happen if you were gone.
• When you’ve just become a parent – For many people, the helpless heft of a newborn in their arms becomes the impetus for taking out a life insurance policy. Life insurance helps provide for your children in case something happens to you.
• When you’ve just become a home-owner – For many Canadians, a home is the biggest and most expensive asset they will ever own. Life insurance can help your family pay off the mortgage if you die.
• You’ve just started a business – If you’ve started a business with one or more partners, life insurance is a must. It can allow the surviving partner to help pay off debt, carry overhead expenses and pay for your replacement. 

How much does life insurance cost?

The short answer: life insurance doesn’t have to cost the earth. The average cost of life insurance per month in Canada ranges from $15 to $100, according to PolicyMe, an online vendor of life insurance. The cost varies according to your age, gender, health and the type of policy you have. Here are a few examples of the cost of term life insurance:

• For ages 40 and under – The average monthly cost of term life insurance in Canada for those aged 40 and under was $26.55 for $500,000 coverage and a 10-year term.
• For all ages – The average cost of term life insurance in Canada was around $34 a month or $380 per year in 2023, according to industry-wide data.
• For smokers – Life insurance for smokers costs more, at $79.91 per month for a male and $57.72 for a female.

The cost of whole life insurance is more expensive. On average, whole life insurance costs $291.05 monthly for males and $337 for females.

In 2020, many employers asked employees to work from home in order to control the spread of the COVID 19 virus. By May, approximately 37 percent of all Canadians worked from home, according to Statistics Canada. Although that number fell to 22 percent by December of 2021, plenty of employers recognized that workers could be equally competent when they worked autonomously from their houses or apartments.

If you’ve been seeking work-at-home or online jobs – perhaps because you’re a stay-at-home mom, an unwilling commuter, or you simply want the freedom to pursue life as a digital nomad – read on for our list of the 16 best work-at-home jobs in Canada.

The good news: none of these online jobs in Canada requires a significant financial investment, and many are suitable for stay-at-home moms, students, and other Canadians who have a day job, but want a side hustle.

1. Teach English online

How much you can earn: US$20 to US$30 per hour

If you have a good command of the English language, you have a skill you can sell online – sometimes with no degree required! If you have a BA, a teaching certificate or a college degree, so much the better. Teaching English is often one of the first work from home jobs in Canada people think of.

Where to find work: Some of the more popular websites include:

• Skooli.com (specializes in teaching English online at the middle school, high school and university level)
• VIPKid. com (online classes for students from kindergarten to Grade 9)
• Preply.com (tutor students in English, Spanish, French and a number of other languages)
• Qkids.com (pre-designed lesson plans to teach children aged 6 to 12 English)
• You could also check out WhalesEnglish.com, iTutorGroup.com and cambly.com.

2. Become an online writer, editor or graphic designer

How much you can earn: Dependent on expertise and market value.

Whether you’re a freelance writer, editor or graphic designer, you can likely find an online job in Canada. Any number of websites allow you to sell your services, and you can set your own rates (providing someone is willing to pay what you think you’re worth).

The caveat: although you may get an online gig the minute you sign up, in many cases, it takes a few weeks before you begin to get a steady supply.

Where to find work: Most freelancer websites require you to create an account and then browse the listings to find work from home jobs you’d like to apply for or bid on.

• Upwork.com – A gig work site for designers, coders, writing and translation, sales and marketing, as well as accountants and finance folks, admin and customer support.
• Workmarket.com – This site caters to designers, writers and other creatives, as well as those in the info tech and health care fields.
• Fiverr.com – At this site, you can offer any service you wish as long as it’s legal and complies with the website’s terms.
• Freelancer.ca – Claims to be the world’s largest freelancer and crowdsourcing marketplace whether you’re a web or app designer, graphic designer, writer or marketing specialist, to name just a few.

3. Sell your unused stuff

How much you can earn: Whatever the market allows.

There are plenty of websites where you can sell your ‘pre-loved’ stuff online. You can post a listing in minutes, and answer inquiries whenever convenient.

As a rule of thumb, though, you have to be at least 18 years old (although Kijiji allows users to post ads at 16). If you haven’t yet reached that age threshold, you may be able to post your items under the account of a trusted adult. This is one of the more popular stay at home mom jobs in Canada.

Where to find a market: There are numerous online marketplaces where you can sell goods to eager buyers, and many are free to use. Among the more popular:

• Kijiji.ca – Sell new or used goods, as well as all manner of services, only in your own city or province, or across Canada.
• eBay.com – From action figures to auto parts, you can post up to 250 items free that buyers can then bid on.
• Facebook marketplace – A destination on Facebook to discover, buy and sell items; buyers can browse listings, search for items for sale in their area, or find products available for shipping.
• Shopify.com – Offers marketing templates and takes care of everything from marketing to payments to secure transactions and shipping starting at $38 per month. Or try it out for $1 per month over the first three months.

4. Got extra space: turn a profit from it on Airbnb or VRBO

How much you can earn: Both Airbnb and VRBO have property calculators that can give you an idea of how much you can charge for your property, depending on the location and size.

Whether you’re going on vacay and want to rent out your house, or you have a room in your apartment you’re not using, that extra space can translate to cold, hard cash. Technically speaking, Airbnb does require some work in person, but many people consider one of the better work from home jobs in Canada, if you own a property.

You must be 18 to set up a listing on either site. And you will have to upload plenty of photos of your property, along with a detailed description and a listing of house rules for guests. Also, bear in mind that some Canadian provinces, regions, towns or cities may require you to purchase a business license or special permit to rent out part of all of your property, while some neighbourhoods don’t allow it at all.

The caveat: You’ll want to have short-term rental insurance. With guests bunking down in your beds and cooking in your kitchen, it’s wise to protect yourself against anything from stolen property to plumbing disasters. And particularly for short-term rentals, you may need to hire a cleaner (or simply do it yourself).

Where to start: The following sites are good bets, but you can also list your property on Kijiji and other online marketplaces.

• Airbnb.com – Charges a three percent commission and has millions of hosts and guests who’ve created accounts to rent or share space.)
• VRBO.com – Charges a five percent commission and lists two million-plus properties around the world.)

5. Take online surveys

How much you can earn: Between 50 cents and $10 per survey. Online surveys tend to range from five to 60 minutes each, so you probably shouldn’t give up your day job. But if you’re just seeking online jobs in Canada for a bit of pocket money, or you’re a stay at home mom looking for opportunities to earn cash online while baby is napping, you’re golden.

Plenty of companies want your feedback, opinions and preferences. The good news: they’re often willing to pay for the info in the form of cold, hard cash or points that can be redeemed for gift cards.

For the most part, you don’t need any experience. You just need to be 13-plus years and have a computer or mobile device with access to the Internet, as well as an email account and a way to be paid online (such as Paypal).

Where to start: You’ll have to set up a profile first, but the only cost is your time. The caveat: Avoid scam survey sites and services by checking out the reviews before signing up.

• Swagbucks.com – Earn cashback from the comfort of your home.
• BrandedSurveys.com – Take paid surveys and participate in a daily poll. This is one of the few survey sites in Canada that has membership levels, meaning you earn more when you’re more active.
• Rewardia.ca – Sign up for free and take surveys to earn points redeemable for gift cards or cash at Amazon, Foodland, Best Buy, the Home Depot and many more.
• YouGov.com – Share your opinions so that companies, governments and institutions can do better and get cash payouts as a reward.
• For a list of 45 different survey companies operating in Canada, check out paidfromsurveys.com.

6. Turn your designs into cash

How much you can earn: You usually get a portion of the sale cost, so your earnings depend on how many people order your products. On the plus side, this is passive income; if you’ve already created the designs or artwork, you don’t have to do a thing once set up is completed. But you may have to wait for a payout until your reach a specific minimum payment threshold.

If you’re an artist or designer, print-on-demand sites offer an opportunity to make money online by putting your designs on posters, mugs, calendars and shirts, with no need to handle your own inventory and shipping.

You’ll need an hour or two to create an account and upload digital files of your designs. And, for the most part, you have to be 18 or older, but one site (RedBubble) specifies you can sell your work at 16, and others allow you to sell with the permission of a parent or guardian.

Where to start: There are many print-on-demand options in Canada, but you could start with the following.

• RedBubble.com – From Boston to Bangkok, millions of visitors come to Redbubble looking for their weirdly meaningful thing. Upload your artwork to products in your ‘shop’, and the site handles the rest.
• Printful.com – Turn your designs into premium products from baseball hats to backpacks, mugs and clothing.
• Teehatch.com – This site requires you to have an online store for your work, which you can connect to Teehatch. When a customer places an order, Teehatch prints it on a t-shirt and ships it out.
• ArtofWhere.com – Create products on Art of Where with your art and stock your online store.

7. Become a virtual assistant

How much can you earn: Between $7.25 and $37.50 an hour depending on your skills and how well you market yourself. 

The basic requirement to become a virtual assistant is proficiency with the computer. For the most part, you must be able to use the Internet, manage email inboxes and use cloud-based communication services, such as file sharing, teleconferencing and password managers. Although the pay not be the best, it’s one of the few work from home jobs in Canada that doesn’t require too many hard skills.

How to start: Highlight your skills in a resume and upload it to various job sites. Good bets include:

• Indeed.com
• Upwork.com
• Workmarket.com
• Fiverr.com
• Freelancer.ca

8. Be an online middle man and dropship

How much you can earn: Dependant on your products, the market you’re able to reach and the effort you invest in selling your goods. Most payments are through e-transfers.

Dropshipping is similar to print-on-demand, except you’re selling goods you don’t keep in stock, rather than artwork and designs. In a nutshell, you set up a website to sell your chosen products. When you get an order, you send it directly to the manufacturer, retailer or wholesaler and they ship directly to your buyer. You’re basically the middle man, so you get to keep a share of the profits for products that can run the gamut from cosmetics to furniture.

You don’t need to have experience, but it can take weeks to get an e-commerce site set up and going, and you will likely have to spend some money on it (anywhere from a few hundred dollars to thousands).

Where to get started: There are a number of reputable dropshipping sites, including the following:

• Shopfiy.com – Everything you need to open your own online ‘shop,’ from store design templates to fulfillment services.
• Web.com – Sell on Etsy, Amazon, eBay and more.
• Wix.com – Everything you need to create and manage websites and mobile sites for your direct-to-consumer brand using simple drag and drop tools.
• Squareup.com – An online e-commerce solution for whatever you have to sell, including tickets, appointments and products.

9. Sell your photos to an image bank

How much you can earn: Payment varies depending on the site, but is usually a percentage of the sale price.

If photography is your thing and you want to start building a career in the field, seek out one of the online stock photography services. You can upload photos to an account and earn money every time someone downloads a pic. Generally, you must be 18 years old, but some allow people as young as 14 to create an account.

Where to start: All you need is a phone or camera to take high-quality photos, as well as an Internet account and a way to accept online payments. It takes just minutes to upload photos, but it could be some time before anyone chooses to purchase them.

• Alamy.com – One of the larger sites with millions of images, videos and vectors. Photographers get 50% of the sale price, which can range from $20 for personal use to $200 for use in a marketing package.
• Shutterstock – This company has a large customer base of companies and marketers. Payouts can range from 10 cents to about $6, according to online sources.
• Smugmug.com – Store, share or sell photos with custom price lists.

10. Tutor online

How much you can earn: Rates vary, but according to tutors.com, prices start at US$25 per hour in the beginning and up to US$80 an hour if you’re a certified expert.

Whether you’re a math, science or English whiz, or you excel at test preparation, you can parlay your talents into a job tutoring students, from kids to adults.

Where to start: Some sites require a degree, diploma or some kind of specialized qualifications as well as an online interview. Others ask only for expertise in the subject. Simply set up an account and a lesson plan (although some sites provide them) and begin earning money. Good bets include:

• SuperProf.ca – Choose your subject of expertise, list your qualifications and begin to build a client base.
• Skooli.com – Popular subject areas include math, algebra, trigonometry, chemistry, etc.
• Preply.com – Tutor students in languages or math.

11. Market your services as a translator/interpreter

How much you can earn: According to ZipRecruiter, the average pay for an online translator in 2023 was US$38.25 per hour.

If you’re fluent in more than one language, you can earn good money doing online translation/interpreting work on a permanent or part-time basis. This is one of the easiest online jobs in Canada.

Where to start: Some of these sites require previous experience, but at the very least, you have to be fluent in more than one language. Good bets include:

• Upwork.com – Hire yourself out as a translator, interpreter or subtitling specialist.
• Gengo.com – A translation specialist hiring fluent speakers of Chinese, Portuguese, Dutch, German, etc.
• Pro Translating – Represents translators for more than 300 languages and regional dialects.
• LanguageLine Solutions – Represents 16,000-plus interpreters in 240 languages, including American Sign Language.

12. Turn your crafts into cash

How much you can earn: That is totally dependent on your product and how much demand it generates.

If you’re looking for stay home mom jobs in Canada, consider selling your crafts. Whether knitting or designing and building furniture is your thing, you can find a market for your unique and beautiful products online. After all, the ‘maker’ movement is hot right now. If you’re looking for work from home jobs in Canada, this is one to consider.

Where to start: Set up your own online store at a marketplace frequented by people seeking one-of-a-kind products. Good bets include:

• Etsy.com – By far the largest of the marketplaces for handcrafted and unique products, Etsy allows you to set up your own storefront for a minimal listing price and then takes a cut of whatever you earn. It will even advertise your products on other websites for a fee.
• Creativemarket.com – This site specializes in digital artists.
• Shopify.com – With Shopify, you can set up sales on your own personal site.

13. Become a proofreader

How much you can earn: From $20 to $25 per hour.

If your English or French skills are stellar, you can earn cash online in Canada by checking other people’s content for spelling mistakes and grammatical errors. Publications that hire proofreaders range from blogs, to newspapers, magazines and book publishers.

Where to start: Some sites specialize in proofreading for a particular market, so if you already have skills or qualifications, you may have an edge. Good bets include:

• Scribendi.com – You will need a university degree in STEM-related field and professional editing or proofreading experience.
• Proofreadingservices.com – You’ll have to pass a quick proofreading test to apply.
• Gramlee.com – Takes applications for part-time proofreaders on an ongoing basis.

14. Sell your skills as a website developer or UI/UX designer

How much you can earn: From US$75 to $US300 per hour.

If you have the skills needed to build online websites or apps for businesses, all you need is a laptop to develop a client base you can handle full-time or as a lucrative side hustle. Working from home opportunities such as being a UI/UX designer requires specific skills. You don’t need to stay in Canada, you can do this job from anywhere.

Where to start: You need some good experience if you are to persuade legitimate businesses you have the talent they need. But once you’ve proven your skills, you can easily build a client base in this high-demand field (both in Canada and further afield). Check out the listings at:

• Flexjobs.com
• Upwork.com
• Indeed.com

15. Start your own blog

How much you can make: If you manage to build a significant following, you can not only market products and services to your readers, but you can also sell ads or sponsored posts on your site. This could easily make you four to five digits a month. That said, some bloggers never make a cent, others make six-figure salaries.

You can blog from anywhere in the world as long as you have internet access, which makes this the perfect job if you long to be a digital nomad. You’ll have to choose a topic that interests you (and hopefully, lots of other people) and then write about it.

Where to start: There is any number of ‘hosting platforms’ that offer customizable templates so you can design your own blog. Among them:

• WordPress.com
• Site123.com
• Wix.com

16. Become a life coach

How much you can make: That depends on your market and whether you can create a name for yourself, but the average life coach salary in Canada is about $47,000. Experience life coaches make an average of $83,000.

If your thing is helping people, either to grow their business, manage their time, raise their children or simply cope with life’s problems, you might consider a career as a life coach. It helps if you have specific educational training (for example, you’ve taken a life coaching course, or you have a degree or experience in business or as a social worker or psychologist). It’s generally wise to pick a niche and then offer one-on-one or group sessions.

Where to start: Unless you already have a thriving blog or website, you will likely want to list your services on one of the many life coaching directories. Among them:

• Noomi.com- A top site with worldwide listings, but you’ll pay $400-plus to list.
• Lifecoachspotter.com – Free to join, but there are limited spots available.
• Mycoachspace.com – This site Lists many types of coaching, including business and career, money and wealth, health and fitness and love and relationships

Benefits of working at home

For many people, online jobs in Canada has tremendous appeal. One Muse survey conducted in February 2022, found that almost 81 percent of the 4,681 respondents would like to work from home full or part-time going forward. Here are some of the primary benefits of working from home:

• Your commute is nonexistent – Being able to nix the long car or transit ride to work frees up more time in your day to be productive and have fun.
• Your wardrobe fees are cut in half – Depending on your job, you may be able to work in your PJs.
• You have more control over your schedule – Many online jobs give you the flexibility to pick and choose when you will work, who you will work for, and what you do in between jobs. You can throw in a load of laundry, chop up some veggies for dinner, or work out when there’s a lull.
• You can eliminate costs – From gas or transit tickets, to clothing and food, you will almost inevitably spend less when you work from home. And if you’re a stay at home mom, working online may well allow you to cut down or even eliminate daycare costs.
• You can live where you choose – Big cities are expensive. When you eliminate the long commute, you can choose to live in a lower-cost location and perhaps indulge your inner country girl/boy.

Disadvantages of working from home

When considering whether work from home jobs in Canada is an option for you, it’s wise to be realistic about your individual likes and needs. Here are five good reasons you may want to ditch the idea of working online:

• You have workaholic tendencies – When you work from home, it can be tough to separate your working life from your home life. You may find you work too many hours because you’re always connected.
• You can’t stay focused – Conversely, you may put off working because there are demands on you at home (particularly if you are a stay-at-home mom working online). What’s more, if you’re apt to succumb to temptation, you may well be distracted by the latest episode of White Lotus, or a call from your mom.
• You could be lonely – Those breaks to discuss your weekend around the water cooler can be a way of connecting with other people. If you do choose to opt for a work-from-home job online, you may be able to alleviate the sense of isolation by planning to walk regularly with a friend, scheduling meet-ups with fellow online workers or pursuing a passion outside of work that puts you in touch with like-minded people.
• You may find it difficult to maintain your creative edge –  If you’ve turned your hobby into an online business, you may find it becomes no more than a job, and you lose the joy you once got from creating.

The problem: as with all mortgage incentives, you’ll there’s a cost associated with a cash back mortgage. If you’re wondering whether a cash back mortgage is right for you, read on to find out how it works, and the pros and cons of the cashback option.

How does a cash back mortgage work?

When you take out a cashback mortgage, you’re really taking out a loan for more than the cost of the home you’re buying. That excess loan can be calculated as a fixed amount (say $5,000) or as a percentage of your home’s value (usually between one and seven percent). 

How do I get a cash-back mortgage?

You’ll find plenty of lenders offering cash back mortgages in Canada, but in general, you need to have a steady job (self-employed folk are usually ineligible), as well as a decent credit score. Lenders also want to know if you will be living in the home, rather than renting it out. 

Once you’ve applied for a cash back mortgage, your lender will let you know how much money you’re able to get. If your application is approved, you will receive the cash back to spend however you choose, either once you close on your home or after you’ve made your first monthly mortgage payment. 

Is a cash back mortgage a good idea?

There’s no doubt that extra cash comes in pretty handy when you’ve just purchased a home. But be aware that there are some drawbacks to cashback mortgages. For example, you may pay a higher interest rate on your overall mortgage, and there may be tricky terms that can cost you over time. Armed with the following information, you can at least make an educated choice. 

Advantages of cash back mortgages

• You get cash when you most need it – Having a lump sum of cash up front can help you cover some of the predictable and unpredictable costs associated with your first year of home ownership. For example, if you’ve purchased a $400,000 home and made a down-payment of $80,000, even a one percent cashback option would leave you with $3,200 in your pocket for an emergency. 
• It could save your bacon in the short term – If you use your cashback to avoid or pay down high-interest credit card debt, it could lower your monthly bills by replacing lower interest debt with high-interest debt. 

Disadvantages of cash back mortgages

• It may be harder to qualify – As mentioned, self-employed people and those with a less-than-stellar credit history could have trouble getting a cash back mortgage. 
• Additional terms can cost you in the long run – When you take on a cash back mortgage, you’re typically agreeing to additional terms, and those terms vary from lender to lender. Look out for things such as repayment and flexibility.
• You might pay a higher interest rate – Typically in Canada, you’ll pay a higher interest rate on a cash back mortgage; usually about 1.75 percent more than on a standard fixed rate or variable rate mortgage without a cashback option. 
• You will likely pay a penalty if you refinance – If you refinance or break your mortgage contract early by moving, you will likely have to repay at least some of the cashback. In fact, some lenders want to be reimbursed for the total amount, and there may be a penalty or repayment premium on top of that. 

What should I look for in a cash back mortgage?

If you decide a cash back mortgage is the right choice for you, keep in mind that there are plenty of options on the market, and some outshine the others. Ultimately, you should probably seek the lowest rate possible, combined with the greatest flexibility.

Cash back mortgage alternatives

So what if you need to boost your cash reserves and monthly payments, but after considering the pros and cons you’ve decided a cash back mortgage isn’t your best bet. Here are some alternatives that can put money in your pocket in those crucial early years of home ownership.

Cash from RRSPs or investments

It’s not always a good idea to cash in retirement savings or investments because you can end up paying higher taxes come tax season. Keep in mind, though, that the Home Buyers Plan allows first-time buyers to borrow up to $35,000 from an RRSP to help with the down payment and other closing expenses.

Line of credit

Interest rates on a line of credit are usually lower than on a personal loan, and they tend to be more flexible. With a line of credit, you can borrow money up to a pre-set limit and you don’t have to use the funds for any specific purpose. 

Even better, a line of credit offers a lot of flexibility. For one thing, you only pay interest on the funds you actually access. For instance, if you have a $100,000 line of credit, but you only need $25,000, you pay interest only on the amount you borrowed. You can also pay back the funds at any time (for instance, when your end-of-year-bonus comes in). Often you have to pay an administration fee to set up your line of credit. 

Personal loan

If you have a good credit score, it’s generally not difficult to get a personal loan at a fair interest rate. 

Credit cards

A low-interest or no-fee credit card can help you cover expenses in the short term or pay them off over time if necessary. Keep in mind, though, that even low-interest credit cards tend to have a higher interest rate than most other options. 

Mortgage broker cash back

Some mortgage brokers will offer you cash back when you go with them. This is where they share the commission with you.  

What are closing costs in Canada?

A number of extra administrative and attorney fees occur right at the end of the home-buying process. These are referred to as closing costs, which are over and above your down payment and the ongoing cost of your mortgage payments. 

As a rule of thumb, such fees add up to 1.5 percent to 4 percent of the purchase price of your home, which isn’t exactly a drop in the bucket. In order to keep your stress level down, it helps to know what those closing costs are and how much each one is likely to set you back. 

Costs before you get a mortgage

Before your mortgage even closes, you’ll face a couple of additional expenses, including:

• The home inspection fee – It’s a good idea to hire a home inspector to assess the home as a condition of your Offer to Purchase. For a fee in the range of $500, the home inspector can clue you in on any potential problems with the property so you go into the transaction with your eyes wide open.  
• The deposit – When you make an offer to purchase, you’re expected to put your money where your mouth is by making a cash deposit to show the seller you’re committed to buying the property. The deposit goes toward your down payment and assures the seller you have the financial means to make the purchase. Unlike the down payment, there is no minimum required amount for the deposit. 

Costs associated with your mortgage

If you buy a house with a down payment of less than 20 percent of the home’s value, you will have no choice but to buy mortgage default insurance from Canada Mortgage And Housing Corporation (CMHC), Genworth or Canada Guaranty. Unlike most insurance, this does not protect you. It’s meant to protect the lender if you can’t make your loan payments. The amount you’ll pay for CMHC insurance depends on the home’s purchase price.

Mortgage default insurance isn’t normally considered one of the traditional closing costs because it doesn’t require an immediate cash outlay. Instead, the cost of CMHC insurance is added to the total mortgage you need, and the amount is amortized (gradually reduced) over the course of your mortgage. We’ve included it here, though, because you need to know about it. 

Common closings costs

When budgeting for your home purchase, you need a clear idea of the last-minute costs you will have to swallow.  Below is a list of the common closing costs: 

Legal fees

You’ll need a lawyer to administer the home purchase transaction, and you can expect to pay a fee to pay for the service, which involves preparing the necessary documents, making disbursements (out-of-pocket expenses such as court filings or courier service) and registering your mortgage with the land titles office. They’ll take care of things such as the title search fee and survey fees and bill it back to you.

Land transfer tax

Many buyers overlook this expense, but the land transfer tax can be costly. It’s calculated as a percentage of the purchase price of a home and was originally intended to generate revenues for cash-strapped municipalities. Now every province has a version of it, although the percentage owing varies from province to province. As a rule of thumb, the more you’re paying for your home, the higher the land-transfer tax. On the plus side, sometimes first-time home buyers are exempt from the tax. 

Appraisal fee

When you take on a conventional mortgage (meaning you have a minimum 20 percent down payment), lenders generally ask for an appraisal to confirm that the market value of your property is accurate.   Appraisal fees range from $350 to $550 for a standard property. Although you have to cover the appraisal fee, typically your lender chooses the appraiser. 

Title insurance

Your ownership of a property is legally referred to as a ‘title.’ And title insurance is meant to protect you if you end up in a property ownership dispute after you purchase your home. (For example, if the previous owner still has outstanding debts on the property, is behind on property taxes, or has taken a second mortgage on the home.) The insurance costs upwards of $300, and lenders require you to purchase it. Your lawyer will collect the premium at closing.

Provincial sales tax on mortgage default insurance

As mentioned earlier, if you need CMHC insurance, you generally pay over time through your mortgage. Unfortunately, you still have to pay the provincial sales tax on the CMHC premium up-front before you can close. Exactly how much you’ll pay depends on the cost of the premium and the province where you live. 

Additional closing costs for rural properties

If you’re buying a home in the country, your lender may well insist that your well water and septic system be tested to ensure they’re in good working condition. This cost usually falls on the home buyer.

Additional costs to consider

The following expenses don’t fall under the umbrella of closing costs, but they do take place at the end stage of the home-buying transaction, so we wanted you to know about them. 

Real estate agents’ commission

If you’re buying a home, you won’t pay your real estate agent any fees. However, if you’re selling a home to fund your new home purchase, expect to pay about 5% of the sale price to your real estate agent. Sometimes your real estate agent will offer discounts if you buy and sell with them.

Estoppel certificate

If you’re buying a condo, an estoppel certificate may be payable if you are and could cost up to $100.

Property taxes

Property taxes are generally an annual expense, and you may not necessarily regard them as a closing cost. But depending on where you live and when you take possession of your home, you may have another upfront cost to pay. 

For instance, let’s say you close on your new home in mid-June, and the previous owner has already paid the property taxes for the entire year. Before you can take possession of the property, you must repay the portion of the property taxes that cover the months after you move in. 

Prepaid utility bills

You may need to reimburse the previous owner of your property for pre-paid costs such as property taxes, utilities and so forth.

Property insurance

Property insurance (or homeowners insurance) must be in place on closing day. Basically, property insurance premiums covers the cost of replacing your home and its contents in the case of fires, floods and any other number of hazards. You usually pay in the form of monthly or annual premiums. The cost of insurance will vary depending on your home and location. For example, a home in a flood zone would require flood insurance.

Home renovations

There may be necessary repairs or changes you must make to your new home, but it’s wise to put off major work for a year or so – until you’ve actually lived in the space and you have a sense of what’s working for you and what’s not. 

Interest rates

While not technically a fee, the interest rate that you pay will determine your monthly carrying costs. Be sure to discuss variable and fixed rate mortgages with your mortgage broker. Which one you decide on can impact your budget.