Raise your hand if looking at the Toronto real estate market makes you want to cry. We all love living in Toronto – the culture, the restaurants, and all the different neighbourhoods. But when it comes to buying a place, it can feel impossible to a lot of people.
We can’t turn back time to when Toronto housing prices were less panic-inducing. But we can help you with a few tips. We’ve teamed up with innovative real estate brokerage Properly to share our best advice for buying a home in Toronto.
Toronto real estate 101
Before we get into the tips, let’s talk about a burning question you might be asking yourself: how did Toronto real estate get so expensive? You’ll probably need a PhD in economics to fully understand all the reasons why there are so many commas in Toronto housing prices. For those who aren’t economics experts, here are a couple reasons to help you understand what’s caused prices to sky rocket:
Toronto is a great place to be!
According to the City of Toronto, tens of thousands of people move to Toronto every single year. They come from around the world to make Toronto their home. This is part of what makes Toronto the diverse and vibrant city we love. However, more people means more competition for housing.
Even though it seems like they’re building a condo on every corner, housing inventory in Toronto is considered low. According to the Toronto Real Estate Board, listings in August 2021 were at the lowest level in a decade. It’s economics 101: when demand outweighs supply, price usually goes up.
Toronto real estate tips
The average price of a home in Toronto is currently just over one million dollars. Don’t let that number freak you out! It might not feel like it, but it is possible to buy a home, even if you aren’t Justin Bieber or Drake. Below are some of our top tips for buying a home in Toronto.
Tip 1: Start saving for a down payment
This should be your first step towards buying a home in Toronto. Look carefully at your finances and budget and choose an amount to put away and save every time you get a pay cheque. A rule of thumb is 20 per cent of your income goes into savings. If you can’t afford that yet, start with 10 per cent. If that’s too much, start with 5 per cent. Everyone has to start somewhere!
Make an appointment at your bank or with a financial advisor to discuss your financial goals. They can help you determine how much you should be saving every month.
Minimum down payment for a house in Toronto
Your down payment for a home in Toronto depends on how much the home costs.
- If your home is $500,000 or less, you need a minimum down payment of 5 per cent of the purchase price.
- For example, if you’re buying a home that costs $400,000, you’ll need a down payment of at least $20,000.
- If the home you’re buying is over $500,000, the down payment is made up of two amounts. The first amount is 5 per cent of $500,000. The second amount is 10 per cent of the remaining balance.
- For example, if you’re buying a home that costs $600,000, the down payment will be 5 per cent of $500,000, which is $25,000, plus 10 per cent of the $100,000, which is $10,000. Your total down payment would be $35,000.
Don’t forget to save for the additional costs associated with buying a home. You will have to cover legal fees, taxes, moving costs and title insurance. These costs can range from 2-4 per cent of the cost of the home.
Bonus tip: Keep an eye on your credit
That three-digit number is what lenders use to determine how likely it is you’ll pay back or default on a loan. A good credit will help you get a good rate on your mortgage. If you’re planning on buying a home in the future, work on building good credit. Here are some ways you can improve your credit:
- Pay your bills in full and on time
- Check your credit score regularly
- Don’t take on too much debt
- If you have debt, try to consolidate it
Tip 2: Do your research
For those of us who love real estate, home décor and all things HGTV, this is the fun part! Browse online to get an idea of prices and neighbourhoods. Make a list of your must-haves and nice-to-haves. Decide what you’re willing to compromise on – in the competitive Toronto market, you might not get every single thing on your list. If you’re buying a home with a partner, discuss what kind of home you want and make sure you’re on the same page. You don’t need to refresh the #TorontoRealEstate hashtag on Twitter every five minutes, but it’s a good idea to keep an eye on real estate news and look out for trends.
Here are a few other resources to get you started:
- The Government of Canada website can help you figure out how much you can afford to spend, and there’s lots of great info on tax credits for homebuyers.
- Realtor.ca – who isn’t guilty of browsing this site during a Zoom meeting?
- Check out our friends at Properly. They can help you buy a new home, as well as sell your existing one. (BTW if you already own a home in Toronto, we’re super jealous.)
Tip 3: Get a great real estate agent
At BrokerLink, we’re the insurance experts. We help our customers find the right insurance so they don’t have to do it alone. Real estate is the same – it’s a lot easier when you have an expert in your corner helping you! We recommend you find a real estate agent to help you find a great home.
“You 100 per cent need a real estate agent,” says Kristen, a Real Estate Sales Manager at Properly. “Agents are product experts and understand the dynamics at play. You want to understand your rights and you need an expert by your side.”
We completely agree with Kristen! No matter how often you watch the Property Brothers, if you’re not a real estate professional, there will be things going over your head. Don’t do it alone! Have an expert in your corner you can trust.
Here are a few tips for finding a great real estate agent:
- Get referrals from friends, family and colleagues.
- Interview a few different real estate agents. You want someone professional, personable and knowledgeable. Come with questions and make sure they have the answers!
- Ask for references and call them.
Bonus tip: Check out Properly’s search and discovery portal to browse homes for sale in Toronto. Warning: Once you start browsing, it’s hard to stop! We recommend you browse outside of work hours – at the very least, make sure your boss isn’t looking.
Tip 4: Get organized
As you get closer to actually buying a home, you’ll need to start doing the boring stuff. You can’t just keep adding stuff to your Pinterest board forever. Once you are serious about buying a home, you’ll need to get all your documents in order, apply for a mortgage and ask your parents if you have a secret inheritance they’ve been meaning to tell you about. Here is a list of some of the documents you’ll need to have handy once you’ve reached this stage of buying a home in Toronto:
- Government-issued ID such as a passport or drivers license. You’ll need multiple IDs and don’t forget to make sure they haven’t expired!
- Proof of employment and income. You may need a letter from your employer, pay stubs, T4s, notice of assessment, bank statements and income tax returns.
- Information about any other assets you may have such as a cottage, car or boat.
- Information about any other debts or financial obligations you may have. That includes student loans, car loans, credit card debt, lines of credit, spousal support and child support.
You might also want to consider getting pre-approval for a mortgage. Pre-approval means your rate is guaranteed for a certain period of time, usually about three months. Mortgage pre-approval will give you a clear idea of what you can afford.
Tip 5: Start house hunting and make an offer!
It’s getting serious now. You’ve spent years saving for a down payment, you got all your paperwork in order, and you’re ready to take the plunge. Your real estate agent will help you find a great home. They’ll also help you through the process of making an offer. In the competitive Toronto real estate market, you may need to make an offer that’s higher than the asking price. Your real estate agent can help you make a competitive offer.
Here is what you’ll need to include in your offer:
- The amount you are offering for the property.
- A deposit (not a down payment).
- Anything you want included in the price, such as appliances.
- When the offer expires (usually 24-48 hours).
- Closing date (usually one to two months from the offer date).
- Explain how you’ll pay.
- Any conditions – common conditions include a home inspection and appraisal.
Tip 6: Insure your home
You knew this one was coming, right? Don’t forget to call BrokerLink to insure your new home! Just like how a real estate agent walks you through the process of buying a home, we’ll walk you through the process of getting insurance.
Getting home insurance is a lot easier than buying a home in Toronto. Here’s how you can get in touch with us:
Get a home insurance quote [phone]
Good luck buying a home in Toronto
Did that sound sarcastic? Because we really mean it! In addition to working hard, saving your money and doing tons of research, you’ll need a little bit of luck in the Toronto housing market. We wish you the best of luck in your house hunting!
FAQs on buying a house in Toronto
How much money do you need to buy a house in Toronto?
It’s true that the average price for a house in Toronto is now over one million dollars. However, there are less expensive options available. If you look in neighbourhoods outside of downtown, and consider condos, there are options below the $1 million mark.
Is it worth it to buy a house in Toronto?
Some people say real estate is always a good investment. Others say Toronto real estate prices are too high and it’s better to rent. Some people want the security of owning property. Others prefer the flexibility of renting. It’s up to you to decide if it’s worth it – it depends on your finances, budget and life goals.
How much is a down payment for a house in Toronto?
If your home is under $500,000, you’ll need a down payment of five per cent. If it’s over $500,000, your down payment will be five percent of $500,000 ($25,000) plus 10 per cent of the remaining price. Long story short, to buy a home in Toronto, you’ll most likely need a down payment of at least $20,000.