A Guide for First-Time Homebuyers in Toronto

May 7, 2024

Buying your first home is a major milestone, and navigating the real estate market can be daunting, especially in a vibrant city like Toronto. This comprehensive guide is designed to help first-time homebuyers understand the process, estimate costs, and take advantage of available incentives.

Available Incentives for Toronto Homebuyers

  1. Home Buyers' Plan (HBP): This program allows you to withdraw up to $35,000 from your RRSPs tax-free to buy or build a qualifying home.
  2. Land Transfer Tax Rebates: First-time homebuyers in Toronto can receive a rebate of up to $4,475 on the municipal land transfer tax and up to $4,000 on the provincial land transfer tax.
  3. First-Time Home Buyer Incentive: This program offers 5% or 10% of the home’s purchase price to put toward a down payment, enhancing your borrowing capacity.

Cost Scenarios for Properties at Different Price Points

Here's a breakdown of the minimum down payment, mortgage calculations, and taxes for properties priced at $500K, $600K, and $700K, assuming a mortgage rate of 5%.

1. Property Worth $500K
  • Minimum Down Payment: $25,000 (5% of $500K)
  • Mortgage Amount: $475,000
  • Monthly Mortgage Payment: Approximately $2,773 (amortized over 25 years)
  • Land Transfer Tax: Approx. $12,475 (after rebate)
  • Property Tax: Approximately $2,500 annually (estimated at 0.5% of property value)
2. Property Worth $600K
  • Minimum Down Payment: $35,000 (5% on first $500K + 10% on next $100K)
  • Mortgage Amount: $540,000
  • Monthly Mortgage Payment: Approximately $3,147 (amortized over 25 years)
  • Land Transfer Tax: Approx. $16,475 (after rebate)
  • Property Tax: Approximately $3,000 annually
3. Property Worth $700K
  • Minimum Down Payment: $45,000 (5% on first $500K + 10% on remaining $200K)
  • Mortgage Amount: $630,000
  • Monthly Mortgage Payment: Approximately $3,672 (amortized over 25 years)
  • Land Transfer Tax: Approx. $20,475 (after rebate)
  • Property Tax: Approximately $3,500 annually

Other Closing Costs

  • Legal Fees and Disbursements: Generally range from $1,500 to $2,500.
  • Title Insurance: Varies, but typically around $300-$500.
  • Home Inspection Fee: Approximately $500.
  • Appraisal Fee: Usually around $300 to $400.

Conclusion

Understanding the financial aspects of buying a home, including incentives, down payments, mortgages, and taxes can help you make an informed decision and plan your finances effectively. Make sure to consult with a real estate professional to navigate the process smoothly.