Can Someone on Disability Buy a House in Canada?

By Emily Southey | 11 minute read

If you currently receive disability income in Canada and want to learn more about the process of buying a house, you are in the right place. There are all kinds of government programs designed to help people on disability purchase a home. We provide an in-depth guide into these programs and expert tips on how to buy a house with a disability income below. 

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Types of Disability Income in Canada

Before diving into the government programs people on disability can take advantage of to buy a home, let’s begin by discussing the types of disability income in Canada. There are two main types of disability assistance in Canada: disability assistance payments and lifetime disability assistance payments.

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• Disability assistance payments (DAPs): Disability assistance payments are payments that come from a registered disability savings plan (RDSP) to the beneficiary or their estate. A DAP payment is a singular payment that can be requested when desired and may contain anything from bonds or grants to contributions, proceeds from rollovers, or income earned.  
• Lifetime disability assistance payments (LDAPs): LDAPS must be paid yearly once started and until the plan is terminated or the beneficiary passes away. Please note that lifetime disability assistance payments have an annual withdrawal limit. 

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How to Buy a House in Canada While on Disability Income

Now that the two main types of disability income in Canada have been outlined, let’s move on to the process of buying a house in Canada while on disability income. As mentioned, there are several government programs intended to make it easier for those on disability to purchase a home. We break down a few of these programs below. 

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Disability and First-Time Home Buyers’ Tax Credit

The Disability and First-Time Home Buyers’ Tax Credit is a financial incentive offered by the federal government of Canada. It allows Canadians with disabilities to claim a $5,000 tax credit when they purchase a qualifying property. To be eligible for the Disability and First-Time Home Buyers’ Tax Credit, several conditions must be met. First, the disability must be of a qualifying nature and must be documented. Second, the individual with a disability must have a disability that limits their ability to do certain things. Third, the property purchased must have accessibility in mind. And fourth, the property must qualify. What is a qualifying property, you may be wondering? The CRA defines a qualifying property as:

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• The property is in Canada and could be any type of home: single-family, semi-detached, townhouse, mobile home, condominium unit, apartment, and more. 
• You must intend to occupy the property yourself or the related person with a disability must occupy the home as a principal place of residence no later than one year after buying it.

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The Disability and First Time Home Buyers’ Tax Credit is non-refundable and you must be approved by the CRA before applying for the credit. Please note that if you are a person with a disability or are buying a home for a related person with a disability, you are not required to also be a first-time homebuyer to take advantage of the tax credit. That said, the home must be purchased so that the person with a disability can live in a more accessible dwelling or in an environment better suited to their needs and care.

Housing Program for Disability Income

A second government program to help ease the burden of buying a home for Canadians with disabilities is the Housing Program for Disability Income. The program was introduced in 1986 and since then it has evolved to offer loans and grants to people with disabilities. Specifically, under this program, eligible applicants can receive grants and loans of up to $10,000, depending on their income level. 

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Obtaining a Mortgage When on Disability Income

Even with the government incentives mentioned above, you may be wondering what other options a person on disability income has when it comes to buying a home. Just like any other homebuyer, a Canadian on disability income can obtain a mortgage to help finance their home purchase. However, the process might look a bit different, especially if you are living on a fixed income with low or bad credit. Luckily, there are mortgage programs out there specifically designed for homebuyers with disabilities. The proof needed to qualify may include documentation showing your income and financial assets, as well as a bank statement that details the disability income you are receiving (if applicable). Keep in mind that not all mortgage lenders will accept disability payments as income, so it’s important to find this out upfront as this can significantly impact your interest rates. 

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Tips for Buying a House in Canada When on Disability Income

Follow the tips below to make buying a house in Canada on disability income as hassle-free as possible. 

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1. Determine your needs

Before house hunting, you must first determine your personal needs. A few questions to ask yourself to help you narrow down what you’re looking for include: 

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• How many people will be living in this home?
• How many rooms and bathrooms do I need?
• Will I be driving? Do I need a parking spot? 
• If I am not driving, is the home located near public transit? 
• Where is my job located? What is the maximum amount of time I am willing to travel from my home to my place of work?
• Does the home or neighbourhood have the facilities/amenities I require (for example, school, grocery store, doctor’s office, restaurants, gym)?

2. Research properties

Step two is the fun part. Now that you know what your needs are, it’s time to start researching prospective properties. In this preliminary research phase, we recommend visiting an online real estate marketplace to get an idea of what’s out there. Using such a platform, you can refine your search with flyers like postal code, number of bedrooms/bathrooms, property type, price range, and more.

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3. Get pre-approved for a mortgage

The third step to buying a home on disability income in Canada is to get pre-approved for a mortgage. This is a vital step for any Canadian homebuyer as it allows you to find out how much mortgage you can qualify for. From there, you can use this information to ensure you look at homes within your budget. To obtain mortgage pre-approval, you can reach out to several lenders directly and receive estimates or you can work with a mortgage broker who will shop around on your behalf. In some cases, mortgage brokers may have experience with certain types of clients, such as homebuyers with disabilities. So if you’re finding it difficult to obtain quotes from lenders directly or simply don’t have the time, research some mortgage brokers in your area who specialize in mortgages for people on disability income. Whether you work with a broker or a lender directly, be prepared to provide a wide range of information and documentation relating to the following:

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• Proof of income/employment (for example, a bank statement that details each and every type of disability income you are receiving)
• Proof of assets
• Personal identification
• Information about your debt or financial obligations
• Proof you can afford the down payment and closing costs (for example, bank statements) 

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4. Set your budget

Once you’ve been pre-approved for a mortgage, it’s time to set a strict budget. When determining your budget, you should use the amount of mortgage pre-approval you qualified for, as well as the estimated cost of other expenses. Keep in mind that there are many other costs that come with buying a home beyond the down payment. These include legal fees, appraisal and home inspection fees, property taxes, closing costs, and more. It is generally recommended that homebuyers budget to pay between 1.5% and 3% of the purchase price in closing costs. 

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5. Weigh your mortgage options

The next step to buying a house in Canada on disability income is to weigh your mortgage options. Buyers can choose from several types of lenders, including A-lenders, B-lenders, and private lenders. The terms and conditions offered by these lenders vary. In addition, if you are a homebuyer with a disability, it’s important to find out which lenders accept disability benefits such as Ontario Disability Support Program (ODSP) benefits if you live in Ontario, as a source of income, as some do but others do not. When deciding between mortgage lenders, be sure to consider the terms of each option, the amortization schedule, the interest rate (and whether it is a fixed or variable term), the lender’s down payment and mortgage default insurance requirements, and whether ODSP benefits are an accepted form of income. 

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6. Save up for a down payment

Step six to buying a home on disability is to save up for a down payment. This is another crucial step in the homebuyer process, whether you are living with a disability or not. That said, again things might work a little differently for people receiving disability income. Why? Because saving for a down payment becomes more complicated when ODSP benefits are involved. According to the Ontario Ministry of Children, Community and Social Services, each ODSP recipient has a limit of assets they can own. The “asset ceiling” is $40,000 for a single person, $50,000 for a couple, and $500 for each dependent other than a spouse. It’s worth noting that the Registered Disability Savings Plan (RDSP) is exempted from these ODSP limitations, but this rule largely makes it more difficult for people on disability income to save for a down payment. If you do not have an RDSP, another option is to save for a down payment via a segregated fund as such funds are considered to be life insurance under the Insurance Act and they are exempt as an asset.