The Complete Guide to Buying a House in Toronto in 2025
Navigate Toronto's competitive real estate market with confidence. From understanding the double land transfer tax to securing the best mortgage rates, this comprehensive guide covers everything you need to know about buying a home in Toronto and the Greater Toronto Area.
What You'll Learn in This Guide
- Setting Your Budget & Understanding Costs
- 8 Essential Steps to Buying a Home
- Toronto's Double Land Transfer Tax Explained
- Down Payment Requirements & Savings Strategies
- Mortgages, CMHC Insurance & Stress Tests
- Choosing the Right Toronto Neighbourhood
- Government Incentives & First-Time Buyer Programs
- Frequently Asked Questions
Understanding the True Cost of Buying a Home in Toronto
When buying a home in Toronto, the purchase price is just the beginning. Most buyers are surprised to learn that additional costs can add tens of thousands of dollars to their budget. Understanding these expenses upfront helps you avoid financial surprises and ensures you're truly ready to buy.
Beyond the Purchase Price: What to Budget For
Toronto home buyers need to prepare for multiple expenses beyond their down payment. The city's unique double land transfer tax system makes closing costs here among the highest in Canada. You'll also need funds for legal fees, home inspections, property insurance, and moving expenses.
Toronto's Double Land Transfer Tax: What Makes It Unique
Toronto is the only city in Canada that charges both a provincial and municipal land transfer tax. On a home priced at $1 million, buyers face approximately $10,475 in Ontario land transfer tax plus another $10,475 in Toronto municipal land transfer tax—totaling over $20,000 before other closing costs.
First-time buyers receive rebates on both taxes, which can eliminate up to $8,475 total, but only on homes priced under certain thresholds. Planning for these taxes is essential when setting your home-buying budget.
| Cost Category | Typical Range | When Paid |
|---|---|---|
| Deposit | 5-10% of purchase price | With offer or within 24 hours |
| Down Payment | 5-20%+ of purchase price | Closing day |
| Land Transfer Taxes (Toronto) | 2-4% of purchase price | Closing day |
| Legal Fees | $1,500-$3,000 | Closing day |
| Home Inspection | $400-$700 | During conditional period |
| Title Insurance | $300-$600 | Closing day |
8 Steps to Buying Your Toronto Home
The home buying process in Toronto follows a structured path. While it may seem complex at first, breaking it down into clear steps makes the journey manageable and less stressful.
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Set Your Budget and Review Your Finances
Before viewing properties, determine what you can comfortably afford. Lenders use Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to assess your capacity. Keep your GDS below 39% and TDS below 44% to qualify for the best mortgage terms.
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Get Pre-Approved for a Mortgage
Mortgage pre-approval confirms how much lenders will loan you and locks in your interest rate for 90-120 days. In Toronto's competitive market, sellers view pre-approved buyers as serious contenders, giving you an advantage when making offers.
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Compare Lenders and Mortgage Options
Banks offer their own products, while mortgage brokers compare rates across multiple lenders. Consider prepayment privileges, penalty clauses, and portability features—not just interest rates. These terms can save you thousands over your mortgage term.
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Hire a Licensed REMAX Real Estate Agent
A knowledgeable Toronto real estate agent provides access to current listings, understands neighbourhood values, and negotiates on your behalf. REMAX agents combine national resources with deep local expertise to help you find the right property and avoid costly mistakes.
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Start Viewing Homes and Narrow Your Search
Focus on neighbourhoods that match your lifestyle, budget, and commute needs. Consider factors like school quality, transit access, future development plans, and property appreciation potential. Visit areas at different times of day to get a complete picture.
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Make an Offer and Submit Your Deposit
When you find the right home, your agent prepares an Agreement of Purchase and Sale including price, conditions, and closing date. You'll provide a deposit—typically 5-10% of the purchase price—held in trust by the listing brokerage.
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Hire a Real Estate Lawyer
In Ontario, every real estate transaction requires a lawyer. They review contracts, check the property title for issues, register your mortgage, calculate closing costs, and ensure funds are properly transferred. Choose a lawyer experienced in Toronto real estate.
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Close the Deal and Receive Your Keys
On closing day, your lawyer combines your mortgage funds and down payment to pay the seller. They register the property in your name and confirm the transaction is complete. Once everything is finalized, you receive the keys to your new Toronto home.
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Find Your REMAX Agent TodayDown Payment Requirements and Strategies
Understanding down payment rules helps you plan your savings and determine which properties you can afford. Canadian regulations set minimum requirements based on purchase price, and coming up with more than the minimum can provide significant benefits.
Minimum Down Payment Rules
The federal government establishes minimum down payment thresholds for all Canadian home purchases. For homes priced up to $500,000, the minimum is 5% of the purchase price. For the portion between $500,000 and $999,999, you need 10%. Properties priced at $1.5 million or higher require at least 20% down.
Why 20% Down Payment Makes a Difference
Putting down 20% or more eliminates the need for CMHC mortgage insurance, which can save you thousands in premiums. Larger down payments also mean smaller monthly mortgage payments, less interest paid over time, and potentially better interest rates from lenders. If you're buying in Toronto's expensive market, aiming for 20% down provides financial flexibility and security.
Deposit vs Down Payment: Understanding the Difference
Many first-time buyers confuse these two terms. Your deposit is paid when you make an offer—typically 5-10% of the purchase price—and is held in trust by the brokerage. Your down payment is the total amount of your own money you contribute at closing, which includes your deposit. The remaining balance comes from your mortgage.
Example: On a $700,000 Toronto condo, you might pay a $35,000 deposit with your offer. At closing, you need a total down payment of $60,000. Since you already paid $35,000 as a deposit, you'd bring the remaining $25,000 to closing.
Mortgages, CMHC Insurance, and the Stress Test
Securing the right mortgage is crucial to successful homeownership. Understanding how lenders qualify you, when insurance is required, and how the stress test works helps you navigate the financing process with confidence.
CMHC Mortgage Insurance Explained
When your down payment is less than 20%, federal regulations require mortgage default insurance from CMHC (Canada Mortgage and Housing Corporation) or approved private insurers like Sagen and Canada Guaranty. This insurance protects lenders if you default on your loan. The premium is calculated as a percentage of your mortgage amount and added to your total loan, meaning you pay interest on it over time.
The Mortgage Stress Test
Every federally regulated lender must qualify you at a higher interest rate than your actual mortgage rate. You must qualify at either the Bank of Canada's benchmark rate (currently 5.25%) or your contract rate plus 2%—whichever is higher. This stress test ensures you can afford your payments if interest rates rise, protecting both you and the lender from financial hardship.
How Lenders Assess Your Application
Toronto lenders evaluate two key ratios: Gross Debt Service (GDS) measures the percentage of your gross income that covers housing costs including mortgage, property taxes, heating, and condo fees. Total Debt Service (TDS) includes all debts—housing costs plus car loans, student loans, and credit card payments. Lenders typically require GDS below 39% and TDS below 44% to approve your mortgage.
Choosing the Right Toronto Neighbourhood
Location matters as much as the property itself. Toronto offers diverse neighbourhoods, each with unique character, amenities, and investment potential. Choosing the right area impacts your daily life, commute, property appreciation, and long-term satisfaction with your purchase.
Key Factors to Consider
Start by evaluating your daily commute to work or school. Toronto's transit system is extensive, but travel times vary significantly by neighbourhood. Research local school ratings if you have children, and explore nearby parks, shopping, restaurants, and community services. Check municipal development plans for upcoming projects that could affect property values—both positively and negatively.
Visit neighbourhoods at different times of day and on weekends. What seems quiet on a Tuesday afternoon might be bustling on Saturday morning. Talk to current residents, walk the streets, and get a feel for the community vibe. Consider your lifestyle priorities: Do you value walkability? Quiet streets? Cultural diversity? Proximity to entertainment? Your neighbourhood should align with how you want to live.
Toronto Neighbourhood Investment Potential
Some Toronto neighbourhoods appreciate faster than others due to transit development, revitalization projects, or increasing demand. Areas near new subway lines or GO Train stations often see property values rise. Emerging neighbourhoods may offer better entry prices with strong growth potential, while established areas provide stability and proven demand.
Government Incentives for Toronto Home Buyers
Canadian governments offer several programs to help buyers afford homeownership. Understanding these incentives and combining them strategically can significantly reduce your upfront costs and long-term expenses.
First Home Savings Account (FHSA)
The FHSA allows you to contribute up to $8,000 annually, with a lifetime maximum of $40,000. Contributions are tax-deductible like an RRSP, and withdrawals for a qualifying home purchase are tax-free like a TFSA. This makes the FHSA one of the most powerful savings tools for prospective buyers.
Home Buyers' Plan (HBP)
You can withdraw up to $60,000 from your RRSP to use toward your down payment, and couples can each withdraw $60,000 for a combined total of $120,000. These funds must be repaid into your RRSP over 15 years starting the second year after withdrawal. Missed repayments are added to your taxable income for that year.
First-Time Home Buyer Tax Credit
This non-refundable federal tax credit provides $1,500 (calculated as 15% of a $10,000 credit amount) to help offset closing costs. You qualify if you haven't owned a home in the previous four years. While it won't cover all your closing expenses, every bit helps when buying in Toronto's expensive market.
Land Transfer Tax Rebates for First-Time Buyers
First-time buyers in Toronto can claim rebates on both provincial and municipal land transfer taxes. The Ontario rebate provides up to $4,000, and the Toronto municipal rebate offers up to $4,475, for a combined maximum of $8,475. These rebates effectively eliminate transfer taxes on homes priced up to approximately $400,000, though few Toronto properties fall in that range anymore.
Work With Toronto's Most Experienced Real Estate Team
RE/MAX President Realty agents have helped thousands of buyers navigate Toronto's competitive market. We provide expert guidance on neighbourhoods, market trends, negotiation strategies, and making your offer stand out.
Schedule Your Free ConsultationFrequently Asked Questions About Buying a Home in Toronto
For a typical Toronto home priced at $700,000, expect to need $35,000-$60,000 for your down payment (5-10% plus), another $21,000-$35,000 for closing costs including Toronto's double land transfer tax, and $5,000-$10,000 for moving and immediate expenses. Total upfront costs typically range from $60,000 to $105,000 depending on your down payment size and property specifics.
Toronto is unique in charging both Ontario's provincial land transfer tax and a separate municipal land transfer tax. On a $1 million home, you pay approximately $10,475 to Ontario and another $10,475 to Toronto, totaling over $20,000. First-time buyers can claim rebates on both taxes, potentially saving up to $8,475, but the double tax structure still makes Toronto's closing costs among Canada's highest.
No. The minimum down payment is 5% on the first $500,000 and 10% on the portion between $500,000 and $999,999. However, anything less than 20% requires CMHC mortgage insurance, which adds to your overall cost. Many Toronto buyers aim for 20% down to avoid insurance premiums and secure better mortgage terms, but it's not mandatory.
Toronto's market competitiveness varies by neighbourhood, property type, and season. Well-priced homes in desirable areas often receive multiple offers, sometimes selling above asking price. Having a pre-approved mortgage, working with an experienced REMAX agent, and being prepared to act quickly all improve your chances in competitive situations.
This depends on your budget, lifestyle, and long-term goals. Toronto condos typically cost less upfront and require minimal exterior maintenance, making them popular with first-time buyers and busy professionals. Houses offer more space, privacy, and control over your property but come with higher purchase prices and maintenance responsibilities. Consider your budget, family size, lifestyle preferences, and investment timeline when deciding.
Budget for 3-5% of the purchase price for closing costs. On a $700,000 home, this means $21,000-$35,000 covering legal fees ($1,500-$3,000), title insurance ($300-$600), home inspection ($400-$700), appraisal ($400-$800), and most significantly, Toronto's double land transfer tax. First-time buyers benefit from rebates, but should still budget for substantial closing expenses.
Foreign buyers face restrictions and additional costs in Ontario. A 25% Non-Resident Speculation Tax applies to most non-resident purchases in the province. Additionally, the federal Prohibition on the Purchase of Residential Property by Non-Canadians Act restricts foreign national purchases until 2027, with some exemptions for temporary residents, students, and work permit holders. International buyers typically need 35% down and face limited financing options.
Next Steps: Starting Your Toronto Home Buying Journey
Buying a home in Toronto requires careful planning, expert guidance, and realistic budgeting. Start by assessing your finances, determining how much you can comfortably afford, and getting pre-approved for a mortgage. Research Toronto neighbourhoods that match your lifestyle and budget, and connect with an experienced REMAX President Realty agent who knows the local market.
Take advantage of government incentives like the First Home Savings Account and Home Buyers' Plan to maximize your down payment. Budget carefully for Toronto's unique double land transfer tax and other closing costs.
