Buying a Home in Ontario: Practical Tips for New Canadians

Buying a home in Ontario is an adventure brimming with choices and happiness, yet it also comes with its share of worries, obstacles, and time commitments.

One of the first things you need to do is assess your affordability and determine how much you can spend on a house.

Next, start saving for a down payment and work on building your credit score. Choosing a location and getting pre-approved for a mortgage are also essential steps in this process.

These steps represent just a few of the crucial elements required in the home-buying process.

As you navigate these initial stages, consider the diverse array of living environments Ontario has to offer.

From the bustling streets of Toronto, with its upscale apartments, luxurious mansions, and expensive housing to the serene, small-town allure offering affordable housing, Ontario caters to a diverse range of preferences and budgets.

Ontario is full of beautiful places and friendly communities. Whether you want the excitement of city living or a calm spot by a lake, there’s something for everyone. It’s a place known for its mix of cultures, good job chances, and a high quality of life.

Buying a home in Ontario is more than just purchasing property; it’s about embracing a Canadian lifestyle enriched with new possibilities and experiences.

Keep in mind that market variations are significant in Ontario; for instance, a 1,500 sq. ft. single house in Windsor may be priced around $700,000, whereas a similar property can easily be double that price in Toronto and its surrounding areas.

It’s essential to research and understand the trends, average home prices, and future projections in the area you’re interested in. This knowledge will help you set realistic expectations and budget accordingly.

This involves considering factors like the type of house you want, the size, proximity to work or schools, and neighborhood characteristics.

For my wife and me, the quality of schools was paramount, which is why we decided to move from our condo to a house in a much better neighborhood. Here is where you can check and compare the school rankings in Ontario.

Thoroughly researching the local housing market in Ontario can give you a clearer picture of the current price trends and availability of properties. This preliminary step sets the foundation for a more focused and efficient home-buying journey.

Explore various mortgage options and lenders, including banks and credit unions, to find a deal that suits your financial circumstances. This step is crucial in understanding how much you can afford and in planning your long-term financial commitment.

It is also worth noting that a good credit score and a stable income source significantly streamline the process of securing a mortgage when buying a home in Ontario.

Word of caution: you might be approved for a mortgage amount higher than what you can comfortably afford, so exercise caution. During our consultation with a mortgage specialist at the RBC bank, we were surprised to learn we qualified for a house priced at least 20% higher than what we were comfortable spending.

Naturally, we opted for a lesser amount, taking into account the need to buffer for potential job loss, travel expenses, and saving for retirement and unforeseen circumstances.

Down Payment: The minimum down payment is 5% for homes priced up to CAD $500,000, 10% for the portion of a home’s price between $500,000 and $1 million, and 20% for homes over $1 million. For example, a CAD $750,000 home requires a minimum down payment of $50,000.

If your downpayment is 20% or more, you gain added flexibility in your home-buying process and can save significantly on interest and mortgage insurance costs.

Mortgage Pre-Approval: A pre-approval not only defines your budget but also gives you an edge in competitive markets. According to a 2023 survey, nearly 60% of homebuyers in Ontario considered mortgage pre-approval as a critical first step.

Property Taxes: The average property tax rate in Ontario varies, with Toronto around 0.614% and Ottawa at 1.07% as of 2023. On a CAD $500,000 home in Toronto, annual property taxes would be about CAD $3,070.

Legal Fees: Legal fees vary but typically include disbursements and title insurance, with total costs ranging from CAD $1,000 to $2,500 depending on the complexity of the transaction.

Home Insurance: The average cost of home insurance in Ontario can range from CAD $1,000 to $2,500 annually, influenced by factors like the home’s value, location, and coverage type.

Maintenance and Utility Costs: Annual maintenance costs are often estimated at 1-3% of the home’s value. For a CAD $500,000 home, this translates to CAD $5,000 – $15,000 yearly. Utility costs can average CAD $200 – $400 monthly, depending on usage and home size.

Create a Budget: Detailed budgeting should include all expenses, both predictable and unforeseen. Statistics show that unexpected home repair costs can average CAD $2,000 annually.

Emergency Fund: Financial experts often recommend an emergency fund that covers 3-6 months of living expenses to safeguard against unforeseen financial challenges.

RRSP Home Buyers’ Plan: As of 2023, the RRSP Home Buyers’ Plan has assisted thousands of Canadians, with over 35,000 participants using the plan annually, according to Canada Revenue Agency data.

Talk to a Financial Advisor: Financial advisors can offer tailored advice based on current market trends and individual financial situations, helping to navigate the often complex landscape of home financing.

Based on my observations and information gathered, it’s common for most property closings to occur within a 30 to 60-day period after an offer is accepted.