How much do you need to buy a condo in Toronto?

by Emma Scott on 21 Jul 2021

Buying a condo in Toronto is a great investment thanks to the city's growing population, economy and opportunity for growth. These factors influence real estate appreciation and allow Toronto real estate to increase value rapidly in a short amount of time. It has also caused condo prices to rise.

While buying a Toronto condo is a worthy investment, it can be difficult to determine exactly what you will be spending to buy a condo. Real estate agent fees, a down payment, property taxes, and unexpected expenses like title and condo maintenance fees can quickly pile up. In this article, we will offer a detailed list of what condo buyers can expect to pay.

Toronto's rising home prices

Toronto is inarguably Canada's most popular city. With a high standard of living, access to great schools, a rich arts and culture scene and a multicultural community, this city attracts many people each year. In fact, its population of 2.93 million people is steadily growing, creating a high demand for homes and causing most sales to end in a bidding war.

As a result of the high demand and low supply of homes, Toronto's real estate market has seen an influx in prices. In May 2021, Zoocasa used sold prices to calculate the average condo price in Toronto. Their real estate experts found that the average price of a resale condo was a whopping $956,428. With that being said, all buyers should be prepared to invest a great deal of money in a Toronto condo.

What to expect from a mortgage loan

While some buyers may be privileged enough to not have to take out a mortgage, most people will need a mortgage loan to buy a condo in Toronto. Those who require a mortgage should shop around for mortgage rates and apply for pre-approval before they begin looking at homes. A mortgage broker can outline a budget, determine monthly payments and provide accounting advice to help get you into a new home faster.

There are a few things that potential borrowers need to complete to apply for a mortgage, but the Stress Test is by far the most telling about someone's financial situation. The Stress Test is a financial test used to determine whether buyers would be able to afford their mortgage payments if their household income changed or their mortgage rate increased. In order to pass the test, borrowers need to prove that they can qualify either at their contracted mortgage rate plus 2% or the rate of 5.25%, whichever is higher. All Canadian buyers are expected to complete a mortgage Stress Test before buying a home.

Mortgage loan insurance can help potential buyers get lower mortgage rates

Most lenders also require borrowers to buy mortgage loan insurance in order to qualify for a loan. Mortgage insurance is typically required because it helps protects lenders' interests if borrowers fail to make their mortgage payments and the loan defaults. An insured mortgage also promises the lowest rates compared to uninsured or insurable mortgages.

The cost of mortgage insurance is calculated as a percentage of the mortgage and the down payment. According to the Daily Hive, this can cost buyers anywhere from 1.5 to 4% on top of their condo closing costs.

Get help from a real estate agent

While many home buyers strive to save money during the home buying process, we strongly encourage everyone to invest in a real estate agent's services.

Real estate agents are knowledgeable experts in the Toronto real estate industry, as well as the home buying process. They can easily help potential buyers find properties within their budget, send in an offer, and guide them through the closing process. This is incredibly important for many individuals who have never bought a house before or are unfamiliar with the legalities of buying a condo.

Real estate agents are integral to finding a beautiful condo in Toronto that fits your budget

Much like shopping around for a mortgage, potential home buyers should compare real estate agents and their commission rates. While some realtors may offer their services at a lower, more affordable rate, they may not provide as great of service. It is strongly recommended that every home buyer find an agent that both understands and strives to meet their list of wants and needs while abiding by their ascribed budget. These individuals may have larger rates, but they can make buying condos much easier.

All buyers can expect their real estate agents to charge them approximately 3.5 to 5% of the selling price, split equally between the buyer’s and seller’s agents.

Prepare a down payment

Home buyers can expect their down payment to be the most expensive part of condo closing costs. The down payment is a portion of the selling price and is determined based on the cost of the property, the buyer's financial situation, and whether the condo will be used as a primary residence or an investment property.

In Canada, the minimum down payment that can be made on a home or condo is 5% of the purchase price. This rate is only available to people who are buying a property that is under $500,000 and meant to be their principal residence. Individuals who are buying a Toronto condo that costs over $500,000 will need to pay 10% of their purchase price as their down payment. Similarly, people who are buying a condo as an investment or secondary residence will be required to pay a 20% down payment.

In order to determine how much money is needed for a down payment, buyers must consider the expected use of the condo, how many properties they have and the selling cost. This will outline what they can expect to pay as a down payment.

Expect to pay provincial and municipal property taxes

Alongside paying a down payment, buyers can expect to pay land transfer taxes. A land transfer tax (LLT) is a tax that is collected by the government whenever a property changes owners. Unlike Ontario's fixed rate of 13% GST, the amount of tax that a buyer needs to pay is determined by the purchase price of their new condo. Determine the approximate amount of tax you can expect to pay using the information below.

Ontario's Land Transfer Tax

  • First $55,0000 will be taxed 0.5%
  • $55,000.01 to $250,000.00 will be taxed 1.0%
  • $250,000.01 to $400,000.00 will be taxed 1.5%
  • $400,000.01 to $2,000,000.00 will be taxed 2.0%
  • Over $2,000,000 will be taxed 2.5%

Toronto Land Transfer Tax

Alongside paying the Ontario Land Transfer Tax, individuals who are buying condos in Toronto can expect to pay a Toronto Land Transfer Tax. This tax is charged on all home and condo purchases made within the boundaries of Toronto in addition to the Ontario Land Transfer Tax. Thankfully, the municipality has made it easy for buyers to determine how much they will be taxed by using the same equation as the provincial tax.

All home buyers need to pay provincial and municipal land transfer taxes while buying a condo in Toronto

LLT Property Tax Rebate

While property tax may seem like an expensive addition to the costs of condo ownership, there are ways to reduce the costs required.

First-time buyers are eligible for land transfer tax rebates and refunds from both the City of Toronto and the provincial government, covering the entirety of the tax for homes up to $368,333. The only requirements are to be a Canadian citizen, 18 years or older, occupy the condo in Toronto within 9 months of purchase, not have a spouse that owns another home, and their new or pre-construction condos need to qualify for a warranty.

The only thing that stops many people from taking advantage of this rebate is not applying for it within 18 months of their closing date. Make sure to apply for the LLT rebate early in order to lower closing costs and save money.

The myth about property titles and condos

Title insurance is a fee that home and condo buyers pay to move the land or property title into their name. In other words, new owners will have legal ownership over the property that their home rests on when they purchase title insurance to put the legal title of the property in their names.

Most people buying a condo do not think that they are eligible for title insurance because their home rests in a condominium building that is shared by many other people and families - not a property they individually own. This is untrue and can be detrimental to owners in the long run. A title can save buyers from experiencing time-consuming and costly problems like fraud, being held responsible for previous owners' arrears, and other issues that could arise a few years down the road.

The payment required to receive a property title is approximately $250 at the time of closing. Unlike other fees, buyers do not need to pay interest on their title or pay this fee more than once.

Include legal fees in closing costs

Alongside other closing costs, lawyer fees should be considered and budgeted for. A real estate lawyer is an important figure in purchasing a home. They review mortgage financing, property insurance, zoning bylaws, mortgage requirements, and all other documentation that is required during closing. While legal fees can vary greatly depending on the lawyer's hourly rate and the amount of time they are required to work, everyone can expect to pay approximately $700 to $2,000 for a real estate lawyer in Toronto.

Budget for lawyer fees and legal fees while planning to buy a condo in Toronto

Budget for monthly condo fees

On top of the final price tag, many condos in Toronto require owners to pay monthly maintenance fees. These fees are typically required by the condo board and must be paid to maintain facilities like gyms, communal lounges, gardens and rooftop patios.

The average condo owner pays around $0.50 per square foot in condo fees each month. A comparable unit in a newer building may pay anywhere up to $1. This cost should be included in one's monthly carrying costs alongside mortgage payments, utility bills and more.

Start planning early

In order to buy a condo in Toronto, potential buyers will need to start budgeting and planning their finances accordingly. Rather than be surprised by how much money you will need to pay, plan in advance for your down payment and other closing costs like legal fees, land transfer fees, title changes and more. While some fees may be difficult to budget for due to their variability, it is never a bad idea to overestimate their cost and save more than needed.

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