The Toronto real estate market is a very competitive one with housing prices being the second highest in Canada. Therefore knowing how much you should save for a down payment can be a tough decision. After all, conventional wisdom says that 20% of the house price is what you should typically put down when buying. However, when the average house costs nearly $700K, that means you would need to save up $140,000 to put down on a property; add to this the closing costs of the home sale and you might be looking at several years of saving before you are able to fund your real estate dreams.
For most people saving up such a sum of money will take far longer than they want to wait when looking to purchase in Toronto and it is why the minimum down payment required for a home sale is 5% of the asking price. However, remember that putting anything less than 20% down on a home will put your purchase into the “high risk” category and require you to have mortgage insurance from the Canada Mortgage and Housing Corporation (CMHC). The lower the percentage of your down payment, the higher the insurance that you will have to pay. The insurance can be paid up-front in cash or added to your mortgage amount. If you aren’t sure from where you will be able to save up for your down payment, there is a very good article on this very subject written by Gail VazOxlade over here //bit.ly/1xCOcUU.
The costs that most first time buyers forget about when purchasing a home are the closing costs. These include all of the fees you will be called upon to cover in order for the purchase to go through. They include everything from notary fees to home inspector fees to the reimbursement of any monies paid towards property taxes. Here is a shortlist of the costs you can expect to cover:
Land transfer tax where applicable
GST/HST where applicable
Prepaid property and utility adjustments
Mortgage life insurance
Movers/van rental for moving
A good overview of what to expect when it comes to costs can be found over here //bit.ly/14ibgPb. Also keep in mind that you’ll need money for renovations, paint, window dressings, etc…
As long as you are prepared with your down payment and the extra costs needed when buying a house, you will have an easier transition when the time comes.