How to buy a house in Toronto

Buying a house is an exciting endeavour, especially considering it’s one of the biggest purchases you will ever make in your life. Toronto has all kinds of housing options, from luxury high-rise condos to historic family homes. This gives buyers lots of options. However, the homebuying process can be daunting, which is why knowing what to expect is so important. Thankfully, BrokerLink is here to guide you through the process.

Key considerations before buying a house in Toronto

Before you start your house hunt, experts recommend asking yourself a few questions. By carefully considering your answers to the questions below, you will have a better idea of whether buying a house in Toronto is right for you:

Do you have enough money saved for a down payment?

The first question to ask yourself is whether you have enough money saved up for a down payment. A down payment is a large sum of money that you are required to pay upfront and out of pocket when purchasing a home. In Canada, there are minimum down payment amounts that must be met based on the purchase price of the home that you buy. These amounts range from 5% of the purchase price for less expensive homes to 20% of the purchase price for more expensive homes. Ideally, no matter the cost of the home, you should aim to put down 20%. Otherwise, you will be on the hook for buying mortgage default insurance, which will add to your housing expenses.

Is your income stable enough to support the ongoing costs of owning a home?

A second question to ask yourself is whether your income is stable enough to support the ongoing costs of owning a home. The down payment is just one of many expenses that come with buying and owning a property. Examples of ongoing costs that homeowners need to pay range from repair and maintenance fees to monthly mortgage payments. Thus, buyers should have a steady and reliable stream of income when purchasing a home. Not only does this ensure that you will be able to pay for all future home expenses but having a stable, high income can make you more likely to qualify for a mortgage, and a larger one at that.

What is the state of the housing market?

Another factor that is worth considering before buying a home anywhere in Canada, including in Toronto, is the state of the housing market. Housing markets fluctuate throughout the year, and although timing the market is difficult, it’s still worth speaking with a real estate professional about the best time to buy. They can offer valuable insight and advice into whether the market conditions are generally favourable to first-time buyers or isolating toward them.

Unsurprisingly, the most advantageous type of market to buy in is a buyer’s market, which gives buyers more leverage and often results in home sales below asking. Oppositely, a seller’s market is when demand outpaces supply, giving sellers the upper hand. Mortgage interest rates have the ability to impact the market, if rates are higher, there may be fewer buyers. Generally speaking, buying a home in Toronto will be expensive, but there may still be more favourable and less favourable times to buy a home.

Do you want to settle down?

One final question to ask yourself before making your home purchase official is whether you want to settle down. Most people choose to buy a home in Toronto when they enter a phase where they are ready to commit to living someplace for a significant period of time. We don’t mean decades, but the typical first-time homebuyer usually intends to live in their new home for a period of three to five years. Consider your lifestyle both professionally and personally to decide if settling down at this point in time is right for you.

Step-by-step guide to buying a house in Toronto

If you’ve answered the questions above and decided that you still want to buy a home in Toronto, then be sure to read through the following. The BrokerLink team has put together a detailed, step-by-step guide to your Toronto home purchase. From researching first-time homebuyer government incentives and rebates to purchasing Ontario home insurance, keep reading to discover how to buy a house in Canada’s largest city:

1. Do ample research

The first step is to do lots of research. What exactly should you be researching? Start with housing prices. Buyers are often surprised to discover just how expensive it is to buy a home in Toronto. The earlier you start looking, the better your odds will be of finding a home within your budget. Knowing the average price of a home in Toronto will also help you plan and achieve your savings goals.

When researching homes, pay attention to both the sale price of the home, as well as how long it’s been on the market for. Research recently sold homes as well to see whether they were sold at, below, or above asking. MLS is a great place to start browsing, as this real estate database can give a good sense of the housing prices to expect in the Greater Toronto Area.

2. Determine your budget

The second step is to determine your budget. Setting a realistic budget is crucial. Otherwise, you run the risk of falling in love with a home that you can’t afford. When determining your budget, you will need to assess your financial situation, taking stock of your investments, savings, assets, debt, and any other financial obligations. From there, make a list of the various expenses that come with buying a home in Toronto, like the down payment, closing costs, monthly mortgage payments, and more. Using all of this information, you can determine how much money you can realistically afford to spend on a property in Toronto.

3. Make a list of must-haves

Before you begin your house hunt, we recommend sitting down and making a list of must-haves. Your must-haves are the features of a home that you are unwilling to compromise on. For example, some home buyers know that they want a home with at least three bedrooms, while others know they want a home with a backyard. To determine your must-haves, think about how long you plan to live in the home and any major life changes that could happen in the future, like having a child or getting married.

4. Look up home buyer government incentives and rebates

Given how expensive it is to buy a home in Toronto, one of the earliest steps you should take is to look into any home buyer incentives, rebates, or grants that may be available to you. On the federal, provincial, and municipal levels, governments in Canada know that being able to afford a home is a struggle that most Canadians face. For this reason, there are a wide variety of government incentives now available to homebuyers. A few of the main incentives include:

Home Buyer’s Plan

The federal Home Buyer’s Plan allows eligible buyers to withdraw up to $35,000 from their Registered Retirement Savings Plans (RRSPs) tax-free to put toward a down payment on a home.

Home Buyer’s Amount

The Home Buyer’s Amount is a federal incentive that offers buyers a non-refundable $5,000 income tax credit after buying a new home.

GST/HST New Housing Rebate

This program gives buyers a partial rebate on the GST or HST they paid when purchasing a new home.

Ontario First-Time Home Buyer Incentive

This land transfer tax rebate is for first-time home buyers in Ontario and can result in a land transfer tax refund of up to $4,000.

Toronto First-Time Home Buyer Incentive

Similar to the Ontario First-Time Home Buyer Incentive, the Toronto First-Time Home Buyer Incentive offers eligible buyers a land transfer tax rebate of up to $4,475, whether the buyer purchases a newly constructed or resale property. Please note that the Ontario and Toronto First-Time Home Buyer Incentives can be combined for a total savings of $8,475.

5. Hire a realtor

Step number four is to hire a realtor. Although not absolutely necessary, having an experienced realtor by your side will be a major asset when it comes to navigating Toronto’s job market. Thankfully, there is no shortage of realtors in Toronto, a city that is home to over 50,000 real estate agents and counting. When choosing a realtor, word of mouth is a great place to start.

Ask friends or family members who recently bought or rented a home for a referral. If that method comes up short, research different realtors online, paying close attention to their reviews. You should also look for a realtor who has a strong presence and proven track record in the neighbourhood you are planning to move to.

Further, we strongly recommend interviewing multiple realtor candidates before choosing one. The interview process gives you a chance to ask several important questions, as well as put their knowledge of the local housing market to the test. When you meet with them, ask them to describe the typical buyer that they represent, how many home transactions they’ve been a part of recently, and what their communication style is like.

Remember that a realtor works for and represents you, so it’s best to choose one that you feel comfortable with. Once you’ve chosen a realtor, they will help you proceed with your house hunt by sending you listings that match your search parameters and scheduling showings on your behalf.

6. Get pre-approved for a mortgage

Getting pre-approved for a mortgage is vital no matter where you plan to buy a home. Mortgage pre-approval not only speeds up the homebuying process but it will also give buyers a much better idea of how much money they can afford to spend on a home. Mortgage pre-approval is when a lender reviews your financial standing and tells you whether or not they would be willing to approve you for a mortgage loan in the future. If the decision is affirmative, they will also inform you of the terms, such as the interest rate and length, that they would likely approve you for, as well as the principal amount.

This information is extremely valuable during the house hunting process. Plus, when it comes time to make an offer on a home, your offer will look more attractive to the seller if you've been pre-approved, since it means you are more likely to get approved for the loan when it comes time to formally apply.

Please note that there is no limit to the number of mortgage pre-approvals you can get, so experts recommend shopping around and getting pre-approved at multiple banks and lenders, allowing you to identify which lender offers the best terms.

7. Schedule showings and attend open houses

Now is the time to start viewing homes. Your realtor will help you schedule showings and visit open houses as they come up. Take notes as you go and remember to ask questions. For example, if eco-friendly features like solar panels are one of your must-haves, find out if any prospective homes come with solar panels. You will also want to ask questions about the home’s history, such as the renovations that have been done or if the property has a history of pests, extreme weather factors, or other hazards.

8. Make an offer and prepare to counter

Once you’ve found a home that you love, it’s time to submit an offer. Your realtor will help you craft an offer that is appropriate for the market and that gives you the highest odds of success. In other words, if it’s a seller’s market, they may recommend offering a purchase price over asking or removing certain contingencies to avoid including too many.

That said, there are certain conditions that your realtor will likely make sure remain, such as a financing contingency or a home inspection contingency. Beyond the offer price and conditions, your offer will also include an expiry date, closing date, and information on why you wish to buy the home. Be prepared for the seller to counter as is commonplace in real estate transactions.

9. Schedule a home inspection

Once the seller has accepted your offer, it’s time to schedule a home inspection. Home inspections are a wise move when buying any home in Toronto, but especially an older home.

These types of inspections can make issues like water damage known, which in turn, can give you leverage in the negotiations. If something particularly unsavoury comes to light, the buyer may also have the option of backing out of the home sale.

10. Sign on the dotted line

Assuming the home inspection is successful and the two parties decide to proceed with the transaction, it’s time to sign on the dotted line and make the home sale official. It is at this point in time that you will also need to pay for closing costs.

Closing costs range from property taxes to legal fees and are usually the responsibility of the buyer unless otherwise stated in the purchase agreement. The deal will not be complete until all closing costs are paid.

11. Move into your new Toronto home

The closing date has passed, which means it’s time to move in! Whether you hire professional movers or plan to conduct the move yourself, make a detailed home inventory to ensure that everything arrives at your new home. This list will also be useful if your home ever suffers damage down the road.

12. Purchase home insurance

Last but not least, if you want to buy a home in Toronto, you will need to purchase home insurance. Although not legally mandated the way that car insurance is, property insurance is one of the best ways to protect your home purchase. Work with an insurance broker in Toronto who has knowledge of the local insurance industry. They will be able to find coverage that is both affordable and meets your needs. Whether you’re looking for tenant insurance, vacation home insurance, standard homeowner’s insurance, or condo insurance in Toronto, a BrokerLink insurance specialist can help you find it.

Learn more about buying a home in Toronto by contacting BrokerLink

If you still have questions about buying a home in Toronto, get in touch with BrokerLink. We are home insurance experts and our licensed advisors have extensive knowledge about the local housing and insurance market. No matter what type of property you are interested in buying, we can help. For example, we have helped thousands of Toronto residents purchase everything from vacation property & cottage insurance to standard homeowner’s insurance and tenant and renters insurance in Toronto.

As experienced professionals, we will ensure that your home buying process is as seamless and affordable as possible. If you want advice on how to save money, both on home insurance and on your home purchase more generally, give us a call. The BrokerLink team can be reached by phone, in person, or online. You can also obtain a free home insurance quote anytime using our online quote tool.

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FAQs on buying a house in Toronto

When is the best time to buy a home in Toronto?

The best time to buy a home varies. Ultimately, buying a home in a buyer’s market is the ideal situation as buyers have more leverage. This usually translates to cheaper purchase prices and better terms and conditions. That said, it’s impossible to time the housing market due to its unpredictability. Plus, sometimes, you can’t afford to wait to buy a home. In this case, spring and summer are generally the times of year when there is the most housing supply on the market. However, there are also the times of year when most buyers are looking, so there is likely to be more competition. Conversely, fall and winter usually see fewer homes on the market. However, fewer people are looking to buy during this period, which could mean lower purchase prices and a less stressful shopping experience.

How can I save for a home in Toronto?

The best way to save money for a home in Toronto is to use a mortgage calculator that will help you determine how much you can expect to pay in monthly mortgage payments and for how long after buying a home. Once you know this number, as well as how much you will need to pay as a down payment based on the purchase price of your ideal home, you can come up with a savings plan that works for you.

How can I save money when buying a home in Toronto?

There are many ways that you can save money when buying a home in Toronto. For example, you can take advantage of government incentives and rebates, like the Home Buyer’s Plan. You can also cut home insurance costs by installing a home security system on your property or bundling home and auto policies.

If you have any questions, contact one of our local branches.