How Much Does it Cost to Own a Home in Toronto?

| Buying

Hey first-time buyers! This one’s for you. We’ve found our first-timer clients often don’t have what we would call a true picture of the costs of home ownership. Sure, it’s easy enough to search housing prices in the GTA online, but those prices don’t give you all the other costs you’ll have on top of your down payment and mortgage.

We thought you’d appreciate having a comprehensive list of all the costs related to home ownership sans the down payment and mortgage so you can really understand how this major step impacts your finances. Here we provide a kind of “year in the life of a new Toronto homeowner” from a financial point of view for a typical resell house (so not condos or new builds).

From tax to utilities and legal fees to home maintenance, it’s a little overwhelming, but nothing a bowl (or tub) of Ben & Jerry’s won’t fix! Calculators ready! Let’s go.

Deposits are NOT Down Payments

We start here because this is a common misconception. A down payment is what secures your mortgage and is required by law to purchase a home in Canada. A deposit comes into play during the offer process, kind of like a good faith payment to show the sellers you’re good for the money. Now, the thing is, the deposit does go towards your down payment, so that’s good news. It’s not like an additional amount on top of your down payment. The big difference is in the timing of when you’ll need to cough up the money.

While the down payment is due on your closing date, the deposit is due within 24 hours of your offer acceptance. So that can pose a problem for some buyers because although there’s no set amount for a deposit, the expectation is for at least 5% of the purchase price.

If you’re buying a Toronto home for the average price of $1.21 million? That’s $60,500 smackaroos you’ll need deposited into a trust held by the listing broker. Now, to be clear, we’re not going to add this to your total first year costs because it is related to your down payment. We just wanted you to understand the difference between the two, so you’d know you’ll need it once your offer is accepted.

Learn more about buying a home in Toronto with these posts next: 

Protecting Yourself with Home Inspection Fees

Okay, now we get into the costs. Since we live in a buyer beware kind of town, we rarely recommend going into an offer without an inspection contingency. This process helps identify issues that will cost you money as the new homeowner and allows you to request the seller cover any major repair costs before you move in. You’re looking at about $400 to $600 for the inspection fees.

Running total: Let’s call it $500

Those Good Old Land Transfer Taxes

Buyers pay the land transfer tax in Ontario and Toronto. So, what does that look like?

Ontario

The tax rates are progressive so increase along with the property value:

  • Up to and including $55,000: 0.5%
  • Over $55,000 up to and including $250,000: 1.0%
  • Over $250,000 up to and including $400,000: 1.5%
  • Over $400,000: 2.0%

Toronto

Same thing with the progressive rates in Toronto:

  • Up to $55,000: 0.5%
  • Over $55,000 up to and including $250,000: 1.0%
  • $250,000.01 up to and including $400,000.00: 1.5%
  • $400,000.01 up to and including $2,000,000.00: 2.0%
  • Over $2,000,000: 2.5%

As a first-time buyer you’re entitled to a maximum Toronto rebate of $4,475 and $4,000 in Ontario, which helps.

So, using our $1.21 million dollar home price, that would come to:

  1. Toronto $14,400
  2. Ontario $14,875

For a grand total of $29,275.

TREBB offers a free land transfer tax tool that makes it easy to understand the land transfer tax owed on your home.

Running total: $29,775

Have more questions? Here are some more home-buying posts you might find helpful: 

Totally Worth It Legal Fees

Your real estate lawyer manages the transfer of title and acts as the “guarantor” managing your mortgage. They also check all is okay with the property from a legal point of view such as:

  • Obtaining and reviewing the title search to ensure your property title is valid
  • Obtaining a tax certificate from the municipality to confirm that there are no tax arrears
  • Preparing closing and mortgage documentation
  • Obtaining the mortgage funds and paying the Seller’s solicitor for the property and your land transfer taxes
  • Registering title to your property on the day of closing, as well as your mortgage
  • Providing the key to you on the day of closing

All your legal fees come to roughly $1,500 to $2,000, so let’s say $2,000 including title insurance.

Running total: $31,775

Protect Yourself and Get a Mortgage Home Insurance Premiums

Although home insurance isn’t mandatory in Ontario, most lenders won’t approve a mortgage without it. We won’t go into the nitty gritty of home insurance because it’s far too complex to discuss here. However, it’s important to know there are tons of different things that impact your premiums.

That said, the average annual insurance premium for a Toronto home runs close to $1,500.

Running total: $33,275

Be Prepared for Home Maintenance Costs

You’re not paying out of pocket for home maintenance costs when you purchase a home, but you really should have a home maintenance fund. Even when your house passes the inspection, you have to prepare for the eventuality of repairs, and you should start your emergency fund as soon as you move in.

Since you just had the inspection, you might get away with 1% of the purchase price for the first year, but experts will tell you the older your home, and the more square footage you have, the more you should put aside. So that could be as much as 3% to 5%.

Let’s do 1% for your first year, which would be $12,100. You can set aside a little each month to make it more manageable and as we said, hopefully you won’t be faced with something major like a roof replacement in the first years of ownership.

Running total: $45,375

Looking for something more specific? These next posts might be just what you’re looking for:

All Those Utilities and Such

We’re not throwing in things like phone and internet since you’re likely already paying for that. The basic annual costs of your City of Toronto utilities and services are roughly:

  • Water, sewage, and garbage/recycling: $750
  • Hydro: $2400
  • Gas: $1620
  • Total: $4770

These prices can vary quite a bit depending on your usage.

Running total: $50,145

Wait, More Property Taxes?

Finally, we come to your property tax. The City of Toronto has a handy tax calculator so you can understand your property taxes when buying a home. However, based on our $1.21 million property, your taxes would come out to the following:

  • 2023 City tax at 0.00506079 = $6,123.56
  • 2023 Education tax at 0.00153 = $1,851.30
  • 2023 City Building Fund at 0.00007195 = $87.06
  • Total Taxes: $8,061.92

Final tally for the first year of home ownership: $58,206

So, as you can see, there are quite a few things included in the cost of owning a home in Toronto. Now, one thing that can provide some comfort is that the next year, you won’t worry about the following:

  • $500 inspection fee
  • $29,275 land transfer tax
  • $2,000 legal fees
  • Total: $31,775

So, that means the bulk of these costs are not going to carry through year after year. That brings your annual costs down to $26,431. Sounds a lot better right?

While looking at these numbers can be discouraging, it’s soooooo important to go into the buying process with your eyes wide open. We want you to have the facts, so you understand the true costs of home ownership in Toronto. Information is power when it comes to major financial decisions, and we believe in empowering our clients by being transparent from the get-go.

Still have questions, or ready to take the leap and buy your first home? Call The Christine Cowern Team at 416.291.7372 or email us at hello@christinecowern.com with any questions or to set up a call. We’d love to work with you!