Buying your first home in Toronto may not be easy, but it can be one of the best investments you’ll ever make. Right now, the timing is excellent for the right person to buy as Toronto housing values have dropped, at least for now. Demand remains high, and property values will likely increase again soon as more people move into the area.
Toronto is highly desirable for people from all walks of life, from young professionals starting their careers to families and retirees. And did you know that Toronto has the lowest property tax rate in Ontario? That’s pretty good when you consider all the amenities and services Toronto offers!
A Look at the Neighbourhoods
Toronto is known for its diversity, and the West End has several neighbourhoods that are perfect for first-time buyers. Let’s take a quick look at some of our favourite areas:
Bloor West Village
The quiet, safe streets of Bloor West Village make it ideal for families or anyone who wants to enjoy a laidback lifestyle. However, “quiet” does not mean boring, and there is no shortage of fun things to see and experience. Bloor West Village is home to many community events, including the July Festival, the Ukrainian Festival, Christmas in the Park and more. You’ll also find shops galore and countless entertainment opportunities to enjoy, such as movie theatres and live music.
Parkdale
Although it is one of the more affordable areas in the city, Parkdale has much to offer. You’ll find homes priced below the Toronto average that still provide all the convenience you’ll ever need. The area is well served by public transit, making owning a car completely unnecessary. If you ever want to go to the downtown core, a quick hop on the streetcar will take you there.
Roncesvalles
Roncesvalles is a go-to neighbourhood for many young professionals because it is small, trendy, and full of character. There is a strong sense of community, with a vibrant nightlife offering live music and energetic pubs and restaurants. However, one of its best claims to fame is that there are more independent shops than franchises. There’s no better place to indulge in some retail therapy!
Find out more about all of the West End neighbourhoods we serve right here.
Can You Afford to Buy in Toronto?
Now that the market is cooling, all housing types have dropped in price. The average cost of a home has fallen from $1,299,894 to $1,074,754 in just a matter of a few months.
Of course, Toronto housing is still expensive. There is no getting around that, but there are ways to make purchasing your first home more attainable. Saving for your down payment will help you to reduce your monthly costs and the amount of interest you’ll pay over time.
Pre-Qualification or Pre-Approval?
Depending on where you are in your home-buying journey, you may decide to get either a pre-qualification or a pre-approval. What is the difference?
- A pre-qualification is easy. You can go online, enter a few details and get a rough estimate of what you may qualify for. The whole process takes only a few minutes and can let you know if you’re in a position to buy. If you’re just starting your search, a pre-qualification is a great way to get the ball rolling.
- A pre-approval is ideal for a more serious buyer. It is far more involved and will take longer, but you will know exactly how much you can qualify for. A pre-approval is far more precise than a pre-qualification and gives you a powerful tool to craft compelling offers that sellers are likely to accept.
Buying your first home can be exciting and terrifying all at once! The more information you have, the better. Here are some other posts you may want to read:
- Innovative Strategies To Make Toronto Real Estate More Affordable
- Semi-Detached or Attached: Which Has the Best Resale Value?
- Finding Your Forever Home in Toronto
How Much Do You Need for Your Down Payment?
Once a seller accepts your offer, you want to have your down payment ready to go. Generally, you’ll be expected to place a 5% deposit within 24 hours as a show of good faith. Once the sale closes, you’ll be required to pay the rest of your down payment. For any house over $1,000,000 or more, you will need at least 20% upfront. If the property costs less, you will need 5% on the first $500,000 and 10% on the remaining amount.
Don’t forget about your closing costs. You need an additional 3 to 5 percent of the total price for closing, legal fees, and land transfer taxes. Some of these costs can be included in your mortgage, but others cannot.
The good news is that government programs are in place to help make your first purchase more affordable.
Home Buyer’s Plan
First-time home buyers are allowed to pull up to $35,000 from their RRSPs to put towards the purchase of a new home. The best part is there are no tax penalties as long as you repay the amount within 15 years. The Home Buyer’s Plan helps with your down payment, which is often the most challenging part about buying your first home.
First-Time Home Buyer Incentive
Will the government lend you money interest-free to fund the purchase of your new home? Under the First Time Home Buyer Incentive, they do precisely that. The federal government will provide up to 5% of a resale home or 10% of a new build to help you with your down payment.
The catch? You are expected to repay this loan, plus a maximum of 8% per year of the gain in the home value. It can also be tricky to qualify for the incentive in Toronto. Your income can’t exceed $150,000 per year, and the total of the loan maxes out at 4.5 times your household income. For a single person with an income of $150,000, your loan can’t be more than $675,000.
Unless you have a hefty down payment or are buying with a partner, this amount will not go far in the Toronto Market. However, if you qualify, the incentive lowers the amount you need to borrow and will help reduce your monthly cost.
Land Transfer Tax Rebates
Land transfer taxes are one of the highest closing costs you’ll face when buying your home. They are particularly challenging because they must be paid upfront, and you can’t put them into your mortgage. For first-time buyers, the land transfer rebates can really help make your home more affordable. How does it work?
If you bought an $800,000 house elsewhere in Ontario, you’d be looking at $8,475 in land transfer taxes. The $4,000 Land Transfer Tax Rebate brings your out-of-pocket expenses to $4,475.
In Toronto, however, there is also a municipal land transfer tax. This means your total amount is $16,475. Luckily, the rebate for first-time buyers is also higher in Toronto, reducing your payment by $8475.
First-Time Home Buyers Tax Credit
You can claim up to $5,000 on your income tax, which will deduct $750 on your tax return to help with your closing expenses. This may not seem like much. However, the federal budget for 2022 proposes doubling the allowance to $10,000, resulting in a savings of $1,500 on your taxes. This amount could go a long way towards your moving expenses, perhaps leaving you with some extra cash for household essentials.
Are you ready to buy your first home in Toronto? We can help! We know the West End like the back of our hands and are happy to guide you to your perfect new neighbourhood. Reach out to us today.
