The Toronto housing market has seen a dramatic spike in the number of people buying condos. This is due to the attractive neighbourhoods of the city, which people are buying condos to both live and invest in. Condos are easy to maintain compared to a house and offer some excellent lifestyle perks. However, before you sign on the dotted line and purchase a condo, there are a few things to consider first. The most basic of these factors include – locality of the development, transport, interiors and amenities.
Of course, your budget is an important consideration when investing in real estate. Your down payment is also included in the final purchase price, which is required to secure your property. This is even before you consider mortgage rates.
In this article, we’ll go over everything you need to know about condo down payments.
MINIMUM DOWN PAYMENT REQUIRED
A down payment is the amount of money that a home buyer must pay when purchasing a home. The amount you put down as a down payment is deducted from the total mortgage amount for your condo. The mortgage loan covers the remaining amount after deducting the down payment.
The required down payment for a condo in Toronto varies. It is ultimately determined by the price of the condominium unit that you wish to purchase. The location has a significant impact on the purchase price in Toronto.
With the right approach to your property search, you can find something to suit all budgets. However, if you haven’t already, you may need to save up to make it happen.
The down payment for your condo may be higher if you are self-employed or have a poor credit score/history. That’s another reason why you should save at least the minimum down payment for the condo you want to buy. This will reduce your debts and thus be more beneficial to you.
The following is an estimate of the minimum down payment for a condominium:
$500,000 or lesser: 5% of the total purchase price of the condo
$500,000 – $999,999: 5% of the initial $500,000 of the total purchase price and 10% of the remaining price above $500,000.
$1 million and above: 20% of the total purchase price of the condo
When purchasing a condo in Toronto, you can easily calculate the percentage you’ll need to pay using the price guide above. Remember that the down payment on your condo will also determine the interest rate for your monthly mortgage payment.
It’s a good idea to bookmark this page so you can return to it later if you’re still looking for condos.
Home Buyers’ Plan for Ease While Making Down Payments
Do you need help calculating the amount you’ll need to put down on a Toronto condo? You may meet the eligibility requirements for the Home Buyers’ Plan (HBP). This plan allows the individual to withdraw up to $25,000 in total.
The Home Buyers’ Plan is completely tax-free and can be withdrawn from the individual’s Registered Retirement Savings Plan (RRSP). This allowance is given to help with the down payment or qualification for the condo. You have up to 15 years to repay the money you have borrowed.
Things to consider before signing up for an HBP:
- Timely repayments are essential
- Will it affect your retirement savings?
Condos, like any other piece of real estate, necessitate careful consideration and planning before proceeding. It is critical that you understand that if you are unable to make your condo payments, you may face significant income taxes. Furthermore, you tend to miss out on any growth while repaying the funds.
Mortgage Loan Insurance
Mortgage loan insurance protects your lender in the event that you are unable to make your condo mortgage payments. It provides no protection to the individual. Indeed, it is sometimes referred to as mortgage default insurance.
Mortgage default insurance, also known as CMHC insurance, is required for mortgage down payments of less than 20% or between 5% and 19.9%.
If your down payment is less than 20% of the purchase price of the condo, you will be required to purchase mortgage default insurance.
A person cannot obtain mortgage loan insurance if:
The condo is worth at least $1 million.
The loan does not meet the requirements of the insurance company that the individual has chosen.
How Much Is Mortgage Loan Insurance?
The mortgage loan insurance fees that you must pay range between 0.6 percent and 4.5 percent. This fee is determined by the amount of down payment required to secure your condo.
The larger your down payment, the lower the fee/premium for mortgage loan insurance.
You can make your premium payment as part of your loan. You can also pay it all at once. In this case, you will have to pay the same interest rate as you would for your overall loan.
When Should You Purchase The Condo?
Time is a major factor in any large financial purchase, especially when it comes to your home. If the minimum down payment you intend to make is less than 20% of the total purchase price of the condo, you may not be in the best financial position right now.
After all, a small down payment is only the beginning of a long financial commitment. Living in a city like Toronto may have higher living costs depending on the neighbourhood you choose.
You have two choices in this situation. You can save money for a while longer before purchasing a condo. You can also buy the condo right away and borrow a larger sum of money.
Check out the few factors associated with both these options.
Option 1: Save for a Little Longer Before Buying A Condo
You will pay a lower interest rate on your new home if you save.
You continue to pay rent (if any) for your current residence.
The required savings would be greater as the real estate market rises over time.
There is always the possibility that you will spend your savings on something else.
Saving reduces the risk of not being able to repay the loan because you are borrowing less.
If you save first, you won’t have to rely on credit cards to pay your deposit. This reduces the possibility of credit card debt, resulting in a healthier bank account.
Option 2: Buy The Condo Now by Borrowing a Higher Amount
As the loan amount increases, so will the interest rate.
There will be an increase in cost because insurance will be required. The high monthly interest rate would result in higher mortgage premiums in general.
The fact that you can stop paying rent on your current home and move into your condo sooner is a plus. However, this is only true if your condo is for sale.
You will receive the condo for the current real estate market purchase price. There is always the possibility of price increases as time passes.
There is always the risk of borrowing more money than you can repay in order to keep up with mortgage payments.
A Few Pointers to Help You Save More Efficiently and Quickly for Your Down Payment
- Set monthly savings goals and keep track of how much you can save in your bank account.
- Make it a habit to put a certain amount aside in your account each month, as if you already own the property and are paying the mortgage.
- Get rid of any credit card debt. You’ll have to pay less interest on your account as a result, and you’ll have more savings to buy the condo and pay off your mortgage.
- You can save your work bonuses, tax refunds, and pay raises to put toward a down payment on a condo.
The amount of your down payment for your condo will be determined by a number of factors. Before you buy a condo, you should carefully consider these factors.
Following the down payment, you will begin mortgage payments on your condo, which will be determined by mortgage rates. Keep all of this in mind to ensure that you can afford the total fcx of the condo. The more you can save ahead of time, the easier it will be to pay your mortgage rate.
To avoid debt, if you pay your down payment with a credit card, the amount must be repaid in full when your statement arrives. Credit cards, in general, can provide purchase security, but they should be used with caution, especially when looking to cover the cost of a home.
The Canadian government also has a mortgage calculator. Mortgage payments for a home are typically spread out over a period of 25 years. Their calculator is an excellent resource for determining how much you will need to repay each month for your mortgage over the course of 25 years.
Do you want to know how much a condo down payment in Toronto is? Visit our website TALLPROPERTY for the most recent news and information about pre-construction condo properties in Toronto.
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