Key takeaways
- Your deposit and your down payment are different: the deposit is paid soon after your offer is accepted and counts toward the down payment.
- On a $700,000 home the minimum down payment is $45,000.
- Toronto buyers pay two land transfer taxes; first-time buyer rebates can reduce them by up to $8,475.
- Budget for closing costs on top of your down payment.
In this chapter
Assessing Your Financial SituationAccumulating Funds for a Home Down PaymentUnderstanding Additional Costs
Assessing Your Financial Situation
Start with an honest look at your money. List your income, your regular monthly costs, your debts and your savings. What’s left each month is what you have to work with for a mortgage and the other costs of owning.
Lenders look closely at your debts compared with your income. Paying down a credit card or car loan before you apply can improve what you qualify for.
Save your down payment and closing costs in a high-interest savings account or a First Home Savings Account. A mortgage broker or financial advisor can show you how your numbers work in today’s market.
Visual guide · First home
Minimum down payment by price
| Purchase price | Minimum down | Share of price |
|---|---|---|
| $500,000 | $25,000 | 5.0% |
| $700,000 | $45,000 | 6.4% |
| $900,000 | $65,000 | 7.2% |
| $1,200,000 | $95,000 | 7.9% |
| $1,500,000 or more | 20% ($300,000 at $1.5M) | 20.0% |
Know your numbers
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IncomeAdd up your regular take-home and gross pay.
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DebtsList car loans, cards and student loans.
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SavingsCount what’s set aside.
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CreditCheck your report and score.
Debt service ratios
What it isLenders compare your housing costs and debts with your income.
Why it mattersThey help decide how much you can borrow.
What to doAsk your lender to show how yours are calculated.
Accumulating Funds for a Home Down Payment
Start saving before you start shopping. Your goal depends on the home you want.
In Canada, the minimum down payment is 5% of the first $500,000 of the price and 10% of the portion from $500,000 up to $1.5 million. Homes priced at $1.5 million or more need at least 20% down. Putting down 20% or more avoids mortgage default insurance, but it isn’t required.
Registered accounts such as the First Home Savings Account can help, as Chapter 10 explains.
Open a separate account, set up automatic transfers and track your spending to find money you can redirect. Extra income from a side job or freelancing can shorten your timeline.
Set small targets along the way. A year of steady saving is easier to keep up when you can see it working.
Understanding Additional Costs
The price isn’t the whole bill. Plan for these costs before you make an offer.
Land transfer tax is often the largest closing cost. Ontario charges it on every purchase, and homes in the City of Toronto pay a second, municipal tax. Eligible first-time buyers can receive up to $4,000 back from the province and up to $4,475 from the City of Toronto. On an $800,000 Toronto home, the two taxes total $24,950; after both rebates, a first-time buyer pays $16,475.
Legal fees vary, and the bill usually adds disbursements, title insurance and HST, so ask for a written, all-in quote.
Lenders usually require home insurance before closing, and the price depends on the home’s location, size and age, so get quotes early. Property tax varies by location and value. Ask for the current bill.
Finally, start a maintenance fund. Something will break, and it’s much easier when the money is already there.
Visual guide · First home
Land transfer tax in the City of Toronto
| Price | Ontario + Toronto tax | After first-time rebates |
|---|---|---|
| $500,000 | $12,950 | $4,475 |
| $700,000 | $20,950 | $12,475 |
| $800,000 | $24,950 | $16,475 |
| $1,000,000 | $32,950 | $24,475 |
Visual guide · First home
Cash to plan for: $700,000 Toronto home
Closing costs
What it isOne-time costs due at closing, on top of your down payment.
Why it mattersYou can’t usually add them to your mortgage.
What to doSave for them early, and ask your lawyer for an estimate.