How To Buy A House In Toronto
Ever wondered about How To Buy A House In Toronto? The same applies to Mississauga, Etobicoke or anywhere in the GTA. Condos too. Our brief guide will get you started on your journey whether you’re dipping your toes for the first time or an experienced campaigner.
Is There A Best Time To Buy A House In Toronto?
There have always been selling and buying seasonal cycles in the GTA. For a better look at how to get an off season deal in Toronto Real Estate have a look at this post here about the best time to buy a house in Toronto.
What Do First Time Buyers Need To Know About Toronto Real Estate?
The actual process is exactly the same whether you’re purchasing a condo or a house for the first time. We have a dedicated post in the form of our guide for first time home buyers in Toronto.
The House Buying Process
In order to purchase a home in Toronto a buyer must follow a standard set of procedures or steps. The number of steps are determined by the financial means of the buyer. The more money you can put down the easier it’s going to be.
What Are The Steps To Take When Purchasing Toronto Property?
In order to secure a great result you have to start with solid financing. This means talking to your lender to find out what you’re eligible for. These days lenders take many forms, your bank or mortgage broker spring to mind. The federal government regulates how much of a down payment is needed. Recently (late 2016) they introduced a stress test (if interest rates rise in the future) to determine eligibility.
Why Do I Need A Down Payment?
A down payment in necessary to buy a house for a number of reasons. Firstly, the more you can put down the less of a mortgage you will need. This reduces interest payments and debt service over time (amortization). It also reduces the lender’s exposure to the debt owed. Secondly, all lenders like to see good faith and intent. Your willingness to provide as high a down payment as possible shows good faith.
How Much Is The Minimum Down Payment On A House In Toronto?
This depends on whether you’re going to want a conventional mortgage or a high ratio mortgage. If you can provide 20% of the purchase price regardless you qualify for a conventional mortgage.
Anything less, say 10% means you will need a high ratio mortgage which must be insured.
Recent changes (February 2017) to the minimum requirements look like this:
- For homes with a purchase price less than or equal to $500,000 the minimum down payment is 5%.
- Homes with a purchase price greater than $500,000 and less than $1 million, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance.
- For homes with a purchase price of $1,000,000 and greater the minimum down payment is 20%.
High ratio mortgages must be insured by a mortgage insurer such as the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada or Canada Guaranty. You will be required to pay the premium for this insurance. The premium can be up to 2.75% of the mortgage amount. The premium can be paid upfront or rolled into the mortgage. This incurs a second amount called the Provincial Sales Tax (8% in Ontario) which must be payed in cash up front as part of the closing costs.
What Is The Difference Between A Deposit And A Down Payment?
The Deposit is a sum of money that is presented with any offer. It typically a Bank Draft or Certified Cheque. The deposit is an expression of good faith from the buyer to the seller. It is called the “Consideration”. “There is no agreement without consideration”. A strong, well drafted offer together with a healthy deposit cheque is crucial in the current market. When an offer is accepted the cheque is deposited into a trust account, usually at the seller’s Brokerage. It is held there safely until the deal closes. The deposit is a guarantee against the buyer backing out, if they reneg on the deal they may forfeit the deposit. Typically the deposit cheque is around 5% of the purchase price. The deposit cheque is added (in addition) to the downpayment at closing.
What Factors Determine How Much Of A Mortgage You Can Get?
Lenders these days are all about the numbers. The main factors that determine the size of any mortgage you are eligible for are these:
- The amount of the downpayment.
- Your annual earnings or salary and work history. This could be individual or combined household.
- Your monthly expenses and predicted carrying costs.
- Your Credit History and report.
Once you have all these pieces of information you can get together with your lender and hash out a comfortable final amount.
Do You Need A Real Estate Agent To Buy A House?
No, you don’t need a Realtor but we highly recommend getting one. The market is too complicated for most people to get a handle on while trying to juggle work, family and life in general. Real Estate Agents work on a commission basis. They get paid a commission when the deal closes. For buyers looking to purchase a house or condo in Toronto and the GTA the commission is rolled into the purchase price. This is covered by the seller. In other words, buyers do not need to pay a commission to a Realtor in Toronto. Read our guide about how to find the best Realtor for YOUR Needs.
How Do You Find The Right Property?
You know you’ve found the right house as soon as you walk into it. To get to it, though, you need to research and preview properties. That means getting on your computer or phone and getting out to Open Houses and Showings. Here at Pat Simmonds Real Estate Services we preview and research dozens of not hundreds of homes and condos for our clients. It’s our job. It also saves our clients hundreds of hours of their own precious time and money. It’s confusing. We eliminate confusion.
Submit An Offer With Confidence
Once you’re ready to submit an offer we’re ready to go. We’ve discussed the price, we’ve discussed going in with your best offer. The offer gets drawn up and submitted on offer day depending if one has been set. Be prepared for the fact that someone else may have a better offer. It’s not the end of the world to lose out on Offer Night. You will get the house you want and deserve. We’re here to help you win.
What Happens With An Accepted Offer?
Right! Now what? Well, you’ve just bought a house. Congratulations are in order. Firstly a pile of documents get final signatures. Once the ink dries the process takes a life of its own. You have a number of days until you take possession (Closing Day) during which time all the final t’s are crossed and i’s are dotted. This could be 30-90 days depending. Your lawyer will take care of most of the paperwork and final adjustments.
What Is Land transfer Tax In Toronto?
Buyers pay the Land Transfer Tax in Toronto. It is part of the closing costs associated with home ownership. Please read our post about this. There are other costs associated with Closing the Deal. We have another post about those costs here. Land Transfer Tax can be daunting but if budgeted for ahead of time it gets factored in smoothly.
What Else Do You Need To Know About How To Buy A House In Toronto?
There are so many small details about how to buy a house in Toronto that it would be overwhelming to put it all in one post. Our expanding blog attempts to cover the minutia one topic at a time. Have a flick through. We cover topics like Home Inspections, Bully Offers, Land Transfer Tax, Different Types Of Ownership and much more. Please don’t hesitate to call us or send us an email with any questions or queries. If you’re a first time buyer you will find more specific information at this link.