The costs of buying a Condo

Welcome to Chapter 2 of condos.ca's First-Time Buyer’s Guide. We're glad you're here.

This guide takes you from 'what is a condo?' to the critical details of the condo buying process. You can see all the chapters at our First-Time Buyer's Hub. Condos.ca is your resource from the first click of research to the clink of your new keys.  

This chapter covers the costs of buying a condo in Toronto in 2019. We touch on mortgages, down payments, land transfer taxes, and the final condo closing costs.  In the next chapter, we’ll look at how much it costs you to keep your new home.

Sample costs for a $600,000 condo

Unless you’re Drake or a YouTube star, you’re most likely going to need a mortgage to purchase a condo in Toronto.

What is a mortgage?

A mortgage is a loan you get from a Bank, Credit Union, Trust Company or Major Mortgage Lender to buy real estate like a condo or a house. You pay back that loan, plus interest, over time. We go into more detail on mortgages in Chapter 4: What is a Mortgage? A mortage broker can help you maximize the loan you're eligible for and minimize the rate you pay. Don't simply go to your bank for a rate.  

How much mortgage do I need?

A good rule of thumb is that a mortgage should be no more than 3-4 times your total income. That could be on your own or with a partner. Take how much money you (or you and your partner) make in a year and multiply it by 3. Then by 4. That will give you a buying price range.

For a $600,000 condo, you would need a mortgage of around $480,000, assuming a 20% down payment.

That means you’d want to be making a total income of around $120,000 - $160,000 for a $600,000 purchase.  

The condo down payment

A down payment is the initial cash investment you make when buying property. It’s your way of saying, “I’m using my hard-earned savings to show the bank that I’m worth lending money to.” How much you decide to put down on a condo depends on your savings. The larger your down payment, the smaller the monthly payments of your mortgage. 

Down payments have minimums that are based on purchase price.

What's the minimum down payment for a condo?

• For condos priced $500,000 or less, the minimum down payment is 5%.

• For condos priced $500,000 to $1M, the minimum down payment is 5% on the first $500,000 and then 10% on the remaining balance.

• For condos priced $1M and more, the minimum downpayment is 20%.

What is mortgage loan insurance?

Mortgage insurance is a cost that gets added to your mortgage if you have less than a 20% downpayment. How much insurance you pay is affected by your down payment. 

How much are closing costs for a condo?

Closing costs for a condo can include two land transfer taxes (for condos in Toronto) and final administrative fees. Typically, closing costs can add up to 1-4% of the purchase price.

Full mortgage options for a $600,000 condo example:

 

Down payment % Cost of down payment Mortgage loan insurance Total mortgage required
5% $35,000 $22,600 $587,600
10% $60,000 $16,740 $556,740
15% $90,000 $14,280 $524,280
20% $120,000 $0 $480,000

 

Looking at this breakdown, you can see that a low down payment actually adds a lot to your loan and the debt you will carry. You will pay interest on that debt. Here is a good resource for simple mortgage calculators.

Land Transfer Tax(es)

In Ontario, the government charges a tax on the transfer of property ownership. The buyer always pays this tax. The tax is based on a percentage of the property value ranging from 0.5% to 2.5%, increasing with the value of the property. The more expensive, the higher the tax.

The City of Toronto also charges its own municipal land transfer tax. If you buy a condo or house in Toronto, you have to pay both taxes. But first-time buyers like you are eligible for a rebate on both city and provincial taxes.

When the time comes you can determine your exact land transfer tax rates. But it’s probably easier to use a land transfer tax calculator.

Land transfer taxes are paid on the closing date of your purchase when ownership is transferred to your name, so make sure you’ve factored it into your budget.

Land Transfer Tax Refunds for first-time buyers

First-time buyers in Ontario may be eligible for a refund of the Ontario Land Transfer Tax, covering all or part of the tax. The City of Toronto also offers a refund program, and you can apply for both if you meet the criteria.

• The maximum Land Transfer Tax refund in Ontario is $4,000.

• The maximum Land Transfer Tax refund in Toronto is $4,475.

• Total refund is $8,475.

The Canadian government has several programs and incentives to help first-time home buyers.

Can I get the land transfer tax refunds?

 

• You have to be a Canadian citizen or permanent resident

• You must live in the property as your principal residence within nine months of the transfer of ownership.

• You cannot EVER have owned an eligible home anywhere in the world.

• If you’re buying with your married spouse, neither of you can have owned a home anywhere in the world while you were married.

The last thing you will pay when buying a condo are the transaction closing costs. 

Closing costs typically include lawyer fees, home inspection costs and property tax.

Condo closing costs

Included in closing costs are the administrative and professional fees of your real estate lawyer or home inspector. You should budget $3,000-$5,000 for this. That may seem a lot but these professionals help you make sound, educated, and safe decisions. 

We outline these costs here and take a closer look at the role these professionals play in Chapter 7: Working with a Realtor and Your Buying Team

Fees for a real estate lawyer:

A trusted real estate lawyer should be on your condo buying team. As we covered in Chapter 1: What is a Condo?, a lawyer puts careful eyes on all the paperwork, including a full review of the building's report card: the Status Certificate. They ensure everything is accurate, up-to-date and that your offer is legal. Lawyer fees are usually in the $1800 range. 


Fees for a home inspection:

A home inspection is the best way to make sure what you’re buying is safe to live in, meets building code and won’t hit you with surprises and expensive fixes after you get the keys. It’s typically around $500.


Paying property tax:

Property tax on closing is technically a reimbursement to the seller of any property taxes they’ve paid after the closing date. The property tax would vary depending on your situation, but just to be prepared, a good estimate is $300. There may also be fees for hooking up your new utility services.


Don't I have to pay my Real Estate Agent?

If you're a buyer in Ontario you don't pay your Realtor. As the buying agent, your Realtor is compensated by the agent who represents the seller.  The owner of the condo pays a percentage of the selling price -- the commission -- and the seller's real estate agent gives a portion of that commission to your Realtor.     

Hopefully you've got a sense of what it costs to buy a condo. Now we'll look at the ongoing costs of condo ownership from mortgage payments to condo maintenance fees to property taxes and more.