How Much Down Payment Do You Need to Make to Buy a Condo in Toronto?
The Toronto condo craze is in full swing – with everyone from young professionals to empty nesters preferring these delightful living spaces in droves. The reasons are obvious – low-maintenance living and a whole host of lifestyle benefits that come with high-rise living.
But before you get too excited about the prospect of owning your own Toronto condo, there are some important things to keep in mind. Location, transportation options, amenities, and interior design all need to be carefully considered before you take the plunge.
And let’s not forget about the financial aspect. Your overall budget is a key factor to consider, but you also need to consider the down payment and mortgage rates. All of these things need to be taken into account to ensure a successful condo investment.
Let’s discuss everything you need about the down payment for a condo in Toronto here:
Minimum Down Payment Required
When you’re ready to make the leap into homeownership, you’ll need to pony up some cash for a down payment. This down payment will go towards the purchase of your new condo and will help reduce your mortgage loan’s total cost. Keep in mind that the amount you’ll need to put down depends on where you’re looking to buy – Toronto digs can be pricey. But, with some smart searching, there are options for every budget. Just be prepared to start saving if you haven’t already!
For those who are self-employed or have had some rough patches with their credit score, the road to owning a condo might be a bit bumpier. But fear not, dear homebuyer – this is where saving for a down payment comes in handy! Not only will it reduce your debts, but it’ll also make you feel like a super responsible adult. Plus, who doesn’t love a good challenge?
Here’s a quick estimate of the minimum down payment for a condo:
- If a condo costs $500,000 or less, you will have to pay 5% of its cost as the down payment.
- If a condo costs between $500,000 and $999,999, you will have to pay 5% of the first $500,000 and 10% of the rest of its cost as the down payment.
- If a condo costs $1 million and above, you will have to pay 20% of its cost as the down payment.
The down payment you make for your condo will also determine the interest rate you pay on the monthly mortgage payment.
If you are browsing condos, you can contact us at Tall Property to know more.
You Can Use the Home Buyers’ Plan
The Home Buyers’ Plan allows you to withdraw up to $25,000 from your Registered Retirement Savings Plan (RRSP) tax-free. You can use this money to pay the down payment on your condo.
You have up to 15 years to repay the money you have withdrawn.
Do remember that if you sign up for an HBP, you must repay it on a timely basis. If you fail to repay the money timely, a condo might cause you to face large income taxes.
Take Out a Mortgage Loan Insurance
We highly recommend taking mortgage loan insurance, also known as mortgage default insurance. And they are necessary if your mortgage down payment is between 5% and 19.9% (or the price of your condo is up to $999,999.)
You can pay the fee for this insurance in lump sum or as a part of your loan.
The fee of your mortgage loan insurance is between 0.6% to 4.5%. The exact amount depends on the down payment you make. If you make a big down payment, the fee or premium of your mortgage default insurance is lesser.
When to Purchase a Condo?
At Tall Property, experts advise that you should buy a condo in Toronto when you have saved up at least 20% of its cost.
Making a down payment for a condo is the start of a long financial commitment. Toronto has high living costs than many other cities. If you save money first, you will:
- Not have to rely on credit cards to pay your deposit making sure you have a healthier bank account,
- Have to pay less interest rate on your mortgage,
- Be able to pay rent for your existing home, and
- Be able to avoid the risk of defaulting on your EMIs.
However, this strategy has its downsides. Real estate prices keep rising over the years and you might spend your savings on other things.
If you choose to buy a condo now, you will have to borrow a higher amount, and hence pay a higher interest rate. It will become necessary to buy insurance – adding up to your monthly premiums.
The good side of this strategy is that you will be able to buy a condo at the current price and avoid the inflationary rates of the future. You might also be able to move into your condo sooner (if it is ready for settlement) and stop paying the rent.
But you will have to be careful that you only take out money that you can repay easily for years to come.
Expert Tips to Save You Money on Your Down Payment
- Save a set amount of money every month.
- Clear any credit card debt.
- Save your work bonuses and tax refunds for making the down payment on your condo.
The more you save in advance, the lesser your mortgage rate will be.
Interested in buying a condo in Toronto and want to know more about it? Visit us at Tall Property!