So you’re thinking of buying a home in Toronto or the GTA. As what could be the largest financial decision you will make in your lifetime, there’s no room for uncertainty when it comes to buying your first home. You’ve come to the right place for expert insights into the process of buying a house in Toronto. Frank Leo is the #1 RE/MAX Agent in the world and has been helping clients buy and sell homes in Toronto & the GTA for 3 decades and has proudly served 1000’s of satisfied clients.
Although buying a house in Toronto may seem daunting, we’ll run you through the process step by step and leave you with a solid foundation of knowledge for this important decision.
What’s The First Thing I Should Do When Thinking of Buying A House in Toronto?
The first thing you should do before deciding on becoming a first-time home owner in Toronto is to sit down and evaluate your financial situation. Ask yourself a few questions:
- Are you prepared to take on the financial responsibility of a mortgage?
- How much do you have for a downpayment?
- How much debt are you carrying?
- Would you be able to handle a sudden change in your income?
Ask yourself the tough financial questions and be honest answering them. Doing so will help you understand where you are financially and if you would be able to handle the mortgage payments during leaner times.
There’s plenty more insights and details about deciding whether it’s the right time for you to buy your first home in Toronto in our Home Buyer’s Guide.
So You’re Ready to Buy A House in Toronto
Buying a house is a big investment, but luckily there is financial assistance available for first-time home buyers.
In 2009, Revenue Canada introduced the First-Time Home Buyers Credit (FTHBC) to help ease the financial impact of buying your first home in Toronto. As a first-time home buyer you may be able to qualify for the First-Time Buyers’ Tax Credit (FTHBC), as long as you meet the following requirements:
- You or your spouse or common-law partner acquired a qualifying home; and
- You did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer).
- You cannot have lived in a home owned by you or your spouse in the past four years
- You must present document supporting the purchase of the home
You also need to determine whether your home qualifies for the credit:
- The home must be within Canada
- The home can be a single, semi, townhouse, mobile home, condo, or an apartment
- You must occupy the home within one calendar year of the purchase date
If eligible, you could receive a 15% income tax credit up to a maximum of $5,000 worth of home purchase costs from the year you purchased your first home. You can also receive credits on fees such as the land transfer tax.
If you’re seeking further guidance reach out to the Frank Leo, #1 RE/MAX Agent in the world, and get help taking full advantage of all the credits that are available to you.
Getting a Mortgage When Buying Your First House in Toronto
Before you start looking for houses, you may want go to a lender and get a pre-approved mortgage to ensure that your budget will allow for the purchase of your home in Toronto.
Do a little research on different lenders, as each lender may have different interest rates and conditions compared to other lenders. Make the decision about which lender you choose to take out a mortgage with carefully since you will be locked into a relationship with them for years to come.
If for any reason you must change your lender after signing with them, a prepayment penalty may be charged against you. Read the terms and conditions of your mortgage contract and ask lots of questions if you do not understand.
Should I Work With A Mortgage Broker When Buying My First Home?
A mortgage broker can help you go to different lenders to try and find the best deal for you. With a broker, you may be able to get some mortgage products & services that are not directly available to the borrower, but the reverse can be true as well.
There are mortgage products that are available only directly to the borrower and can’t be purchased through a mortgage broker. A smart buyer will compare brokers and the lenders they work with to find the best deal.
Need to crunch some numbers for your mortgage? Use our FREE mortgage calculator developed by the #1 RE/MAX Agent in the world, and take a step towards buying your home in Toronto.
You’ll Need A Stress Test Before Getting a Mortgage
A stress test is a way for lenders to measure a borrower’s ability to make payments during tough times. They need to know if the borrower would be able to continue with payments in case of a sudden change in income, job loss, or if an increase in interest rates were to occur.
The Canadian Government requires that all federally regulated financial institutions issue this test in order for the borrower to be approved for a mortgage.
Want to see if you can afford a mortgage? Use our mortgage affordability calculator tool to find out.
Here’s How The Stress Test Affects You When Buying Your First Home in Toronto
A stress test affects which homes you can afford to buy because it impacts the mortgage rate you’re able to afford.
Let’s look at a simple example.
Say you’ve applied for a mortgage at a bank after making a down payment of 5% of the value of your new home. Since your down payment is below 20% of the home’s value you’ll need mortgage loan insurance, which is an additional cost on top of your mortgage payments.
Now, if you don’t qualify for the Bank of Canada’s conventional 5-year mortgage rate of 5.34%, you’ll need to add an additional 2% for the stress test to whichever rate you negotiate with your lender, let’s say 3%.
In this scenario, the total money you would be able to put towards your home would be less due to the extra percentage points that you must be able to cover in order for you to be approved for a mortgage.
Although it’s not ideal for the borrower, the stress test is a requirement for anyone seeking to borrow money for a mortgage in Canada.
Hire a Realtor When Buying Your First House in Toronto
Don’t take any chances when it comes to choosing a realtor. Do your homework on the realtors you like and choose the best from the available selection. With an investment of this size you don’t want someone representing you who doesn’t have experience, success, or a winning strategy. Find a realtor that is dedicated to helping you find your dream home.
Whether you are a first-time buyer or not, a good realtor will understand your needs, answer any questions, and walk you through the home-buying process to make it as smooth as possible.
With a great realtor the home-buying process will be less of a stress. Your realtor will make it as easy as possible by keeping you informed and up to date every step of the way.
Ready To Buy Your First House?
When you are ready to become a home owner, whether it’s your first time or not, Frank Leo can help.
With 30 years of real estate experience in Toronto & the GTA, he has helped 1000’s of families find their first home. Contact Frank Leo to see how he can help you as a first-time home buyer and how he became the #1 RE/MAX Agent in The World.