Your house won't smell like chemicals unless you use noxious chemicals on the rifle.
Here is what you need to do:
1) locate some old t-shirts or heavy duty paper towels and a tube of your favorite light gun oil. Hoppes' gun oil in the orange squeeze bottle from Canadian Tire will work fine and is cheap and can be bought everywhere. Or WD40.
2) Watch this video.
3) Your rifle will differ in minor way as it's the 7.62x39 version, but disassembly should be about the same. Take the gun completely apart on a piece of cardboard or some laid out newspaper so nothing gets greasy or oily.
4) Grab the rags you set aside, put a healthy dose of oil on the rag and start rubbing down all the metal parts. Almost certainly you have no rust on our gun. It's likely just packing chemical residue.
5) Now watch this video.
6) You will need some appropriate grease. Don't worry about using the specific brands in these videos, you can just get some Castrol wheel bearing grease for cheap at Canadian Tire in a 500ml tub and it will work fine. Or buy a boutique gun grease. It won't matter, and grease of the right consistency will work well in the M14. Lubricate and oil the rifle as instructed. Almost all M14/M305 lubrication is done with grease, while oil is rubbed over metal surfaces more as a corrosion inhibitor than as a lubricant.
7) Re-assemble the rifle.
8) It's unlikely your mags are causing the bolt to not close. those AK-type mags are rock and lock, the front lip goes in first and you then rock the mag back into place until the magazine release catch engages on the tab at the back of the mag. M1's and M305's in 7.62x39 will often have the bolt hang up is carefully released over an empty magazine. Just give the operating rod handle a push and it should ride over the follower and snap closed. That is normal, and it doesn't happen on a loaded magazine. Don't load the mag with live ammo in your house though!
Good luck.