How Much Do You Really Need to Buy Your First Home in Ontario?

Buying your first home is exciting! 🏡 But between saving for a down payment, figuring out closing costs, and trying to understand all the numbers, it can be hard to know how much money you actually need.

The good news? You may not need as much as you think to get started. Let's break down the costs so you can start planning with a clearer picture of what to expect.

I'm Daniella Marie Armitage, a Mortgage Agent Level 1 with Mortgage Architects – A Better Way. My goal is to make the mortgage process easier to understand and help you feel confident about your options.

1. How Much Do You Need for a Down Payment?

Your down payment is the amount of money you put toward the purchase price of your home. The minimum required depends on how much the home costs.

For eligible homes in Canada, the minimum down payment is generally:

• Homes priced at $500,000 or less: 5% of the purchase price.

• Homes priced between $500,000 and $1.5 million: 5% of the first $500,000 and 10% of the amount above $500,000.

• Homes priced at $1.5 million or more: At least 20% of the purchase price.

If your down payment is less than 20%, you'll generally need mortgage loan insurance, subject to eligibility requirements. This protects the lender and usually adds a cost to your mortgage. Your lender may also require a larger down payment depending on your financial circumstances.

Let's look at an example.

Imagine you're buying a home for $600,000.

Your minimum down payment would be:

• 5% of the first $500,000 = $25,000

• 10% of the remaining $100,000 = $10,000

Total minimum down payment: $35,000

Remember, that's just your down payment. You'll also need to budget for closing costs and other expenses.

2. Don't Forget About Closing Costs!

This is one of the biggest surprises for first-time homebuyers. Saving your down payment is important, but there are other expenses you'll need to cover when you purchase your home.

Some common closing costs include:

• Land transfer tax: A provincial tax payable when you purchase a property, subject to applicable exemptions and rebates.

• Legal fees and disbursements: Your real estate lawyer handles the legal work required to complete your purchase.

• Title insurance: Helps protect against certain title-related risks.

• Home inspection: An inspection can help you understand the property's condition before you commit.

• Appraisal fees: An appraisal may be required by your lender.

• Adjustments: You may need to reimburse the seller for certain prepaid property taxes or other expenses.

• Moving expenses and utility setup: Don't forget about the costs of actually moving into your new home!

  • As a general planning guide, closing costs can be around 1.5% to 4% of the purchase price, although your actual costs will depend on your property and circumstances.

For example, on a $600,000 home, that could mean approximately $9,000 to $24,000 in closing costs.

You may not have every one of these expenses, and some costs vary significantly. That's why estimating them before you start house hunting can make a big difference.

3. Could You Qualify for a First-Time Homebuyer Rebate?

Potentially! If you qualify as a first-time homebuyer in Ontario, you may be eligible for a provincial land transfer tax refund of up to $4,000.

Eligibility rules apply, including requirements relating to previous homeownership and occupying the property as your principal residence.

If you're buying in Toronto, there's also a separate municipal land transfer tax to consider, although eligible first-time buyers may qualify for a separate municipal rebate.

It's worth checking which rebates may apply to your situation because they could reduce the amount you need at closing.

4. What About Mortgage Payments and Other Monthly Expenses?

Once you've purchased your home, you'll need to make sure the ongoing costs fit comfortably within your budget.

Along with your mortgage payment, consider:

• Property taxes

• Home insurance

• Utilities

• Maintenance and unexpected repairs

• Condo fees, if applicable

• Other existing debts and financial commitments

A lender will look at your income, debts, credit history, down payment, and other factors when assessing your mortgage application. You'll also generally need to qualify under the applicable mortgage stress test.

Just because you qualify for a particular mortgage amount doesn't necessarily mean you should borrow the maximum available. Your budget should leave room for everyday life, savings, and the occasional unexpected expense.

5. How Can You Prepare Before You Start House Hunting?

A little preparation can make the home buying process feel much less overwhelming.

Here are a few steps you can take:

1. Review your finances. Look at your income, expenses, savings, and existing debts.

2. Set a realistic budget. Consider both your down payment and your expected monthly housing costs.

3. Estimate your closing costs. Don't leave these expenses until the last minute.

4. Explore your mortgage options. Understanding your options early can help you plan your next steps.

5. Consider a mortgage pre-approval. This can help you understand your potential borrowing range, although it isn't a guarantee of final mortgage approval.

You don't need to have every answer before asking questions. Give me a call and we can figure it out together.

Let's Make Your First Home Feel a Little Less Overwhelming 🩷

Buying your first home is a big milestone, and you deserve to understand the numbers before making such an important decision.

I'm here to help you explore your mortgage options, understand the costs involved, and feel more confident about the next steps.

You can also explore my mortgage app to estimate your purchasing budget, calculate potential closing costs, and get an estimate of Ontario land transfer tax.

If you're planning to buy your first home in Barrie or elsewhere in Simcoe County, I'd love to help you get started.

Have questions about buying your first home? Let's chat!

Daniella Marie Armitage
Mortgage Agent Level 1
Mortgage Architects – A Better Way | Brokerage #13660

This article is for general informational purposes only and is not a commitment to lend or a guarantee of mortgage approval. Down payment requirements, rebates, and closing costs depend on individual circumstances and applicable program rules. Please confirm your eligibility and costs with the appropriate professionals.