Buying a Condo in Toronto
In this post, we’re going to talk about buying a condo in Toronto. Whether you are looking to stop paying rent and buy your first home, or you currently own a home and are looking to downsize, a condo can be an excellent choice. As a Toronto realtor, I can confidently say that it’s all about knowing the market and your budget. We’ll start with finances.
Getting your Finances in Order
Get your Toronto condo down payment organized.
You will need at least 5% of the purchase price on a Toronto condo under $1,000,000. If the price is above $1,000,000, you will need 20%.
Note that if the funds are coming as a gift, in whole or in part, your lender will request a letter from the person gifting the funds. If the money is coming from outside Canada, it will need to be in your account for at least 90 days prior to closing.
If you’re using the federal government’s Home Buyers’ Plan for first time home buyers, you can use up to $35,000 of your RRSP savings ($70,000 for a couple) to help finance your down payment on a condo property. To qualify, the RRSP funds you’re using must be on deposit for at least 90 days.
Make sure your condo purchase deposit is accessible.
Your deposit is the money you will need to provide once you have an accepted offer. A typical deposit is 5% of the purchase price. It must be received within 24 hours of an accepted offer. In some cases (especially in Toronto), the deposit accompanies the offer and is part of the down payment. If your deposit funds are in an investment account, make sure they’re available once you start shopping for a condo property. The deposit is usually paid by certified cheque, bank draft, or wire transfer.
Get pre-approved for a mortgage.
It’s very important to know how much you can afford before you start shopping for a condo in Toronto. A pre-approved mortgage will let you know how much money you can borrow, how much you can pay back every month and what your interest rate will be.
When you go to get pre-approval, your lender will require:
- your credit check (the lender will run this report),
- an employment letter that states your status, employment start- date, position and salary,
- a copy of your T-4, and
- your Notice of Assessment confirming that your income taxes were paid.
Some criteria your lender will consider on the purchase of a condo:
- The cost of maintenance fees.
- Condo units under 500 square feet might require a 20% downpayment. (In fact, some lenders won’t finance these small units at all.)
- CMHC and lenders have a list of condos they will not finance. This is usually related to significant problems with the building.
Helpful programs to know about:
- CMHC First Time Home Buyer Incentive helps first time homebuyers reduce their monthly mortgage payments without adding to their financial burdens.
- The Home Buyers’ Plan (HBP) is a federal program that allows first time home buyers to borrow up to $35,000 tax free from their RRSP.
- There are land transfer tax rebates in both Toronto and Ontario. The purchase price determines the amount of the rebate, up to a maximum of $4,000 (capped).
Educate yourself about closing costs.
Typically, your realtor’s fee comes from the proceeds of the sale, paid by the seller. Other costs you can expect to pay out of pocket include land transfer tax, legal fees, lender or appraisal fees, and any adjustments (reimbursing the seller for any prepaid expenses).
Determining what you want
Build your real estate advisory team.
Getting clear about what you want will require a team effort, so make sure to assemble the best team possible:
Your Toronto realtor: You want a real pro. Your realtor will need to know the market place you’re searching in. They will need to be receptive and attentive to your needs. They need to be great at conveying information to you and also educating you on the Toronto market and the process. You want someone who knows the pros and cons of various condos, and more importantly, the right condo for you!
Your real estate lawyer: Your lawyer will review the status certificate and manage the closing. Make sure you hire a lawyer experienced with helping clients buy condos.
Your bank/mortgage broker: Whichever one you choose, hire them at the beginning of your real estate journey.
Your friends and family: It’s typical to have family or friends involved. We all like to have a ‘go to’ person in life. Decide whom you want (avoid entourages), but also set boundaries for when you want them involved and when you don’t.
Decide on the kind of neighbourhood/building you want to live in:
- Do you want a condo, a loft, or a townhome?
- Do you want low-rise, mid-rise, or high-rise?
- What about Toronto’s hard lofts and their unique features?
Decide on what amenities are important to you.
- What size of space is needed?
- Are upgraded features important to you, or are you content with features in original condition, allowing you to build value into the property?
- Is parking a necessity and what are you willing to spend to have parking?
- Storage — do you need a locker?
Get to know the Toronto market.
Your realtor will assist with learning to read market reports, and analyzing sold prices of Toronto condos.
Finalize your budget.
Now you know what you want, you know what’s affordable, and you are pre-approved for a mortgage. You have analyzed the Toronto market, so now you can decide how much you’re willing to spend on buying a condo.
The Search for a Toronto Condo
Most people will start their search online where there are a number of great resources available to you:
Realtor.ca: This is the MLS (multiple listing service). This site is great for searching what properties are currently available.
Custom listings: Your realtor will set you up with custom listings. This is a great way to see available listings daily, based on your search criteria. This makes navigating the market much easier.
COLLAB: The best and fastest way to stay in tune with a fast paced market is to have your realtor set you up with COLLAB. This is a tool where Toronto real estate agents can set clients up with multiple searches in real time, just how the agents receive them, instantly!
Building Due Diligence.
Consider researching Toronto developers and their reputations, which will help you know which properties to focus on and which to avoid. Here are some things to look into:
- Quality of Construction: If the building is poorly constructed, it doesn’t only affect its appearance, but will also likely cause an increase in condo maintenance fees, which can negatively impact values and your investment.
- Owner-occupied versus tenant-occupied: If a large number of units in the building are occupied by owners rather than tenants, it’s likely that the building is cared for well, which should help the condo value appreciate over time.
- Condo building management: Is the property well managed? Not all property managers are created equal.
Unit Due Diligence.
Spend some time considering the merits of the unit you’re considering.
- The view: The view from a unit has a great impact on value. Keep in mind though, that as the city of Toronto grows, that view could change as new developments are constructed.
- Neighbours: You can never guarantee what kind of neighbours you have, or for how long, but try to pay attention. Use your senses — what do you hear, see and smell?
Neighbourhood Due Diligence.
Spend some time considering the merits of the neighbourhood you’re considering.
- Transportation options.
- Demographics of the area.
- Proximity to grocery stores, parks, schools, and lifestyle. These factors are important not only for your enjoyment, but also for your investment.
- Pricing — depending on the type of market conditions at play, you may see pricing increase or decrease on a month-to-month basis during your search process. Keep a close eye on the direction of the prices.
Would like to know more about buying a condo in Toronto?
If you would like to know more about buying a condo in Toronto, or you have any questions, please visit my website at livingthe6ix.ca where you’ll find my contact information, as well as much more about buying and selling real estate in Toronto.