Buying a Home   in Ontario

If you’re like most Ontarians, you’ll skip the development work and purchase a home. The first step to buying a home in Canada is working with a trusted mortgage broker.

Using our industry-leading technology, unparalleled know-how and access to several lenders, we’ll find you the ideal match for a mortgage. We’ll lock you into a pre-approval, at which point you’re free to start home hunting in earnest.

We advocate on your behalf so you can enjoy all of the benefits of buying a home in Canada.

Mortgage brokers are licensed real estate experts that understand what it takes to finance a home in the current market. They liaise between you and the big lenders to ensure that you get the right mortgage for you – a high amount, a low rate, attractive terms, etc.

As you kick off the process to buy a home in Ontario, Canada, let a mortgage broker lay out your options. Together, you’ll determine the type of mortgage you qualify for, and which one’s the best fit.

Ideally, you want a well-connected broker, one with access to AAA, B, and Toronto private mortgage lenders to secure the best rates and terms. More options means a better chance of landing the perfect mortgage.

Purchasing your first home or piece of vacant land can be an exciting but intimidating experience. It’s essential to ensure you have all the information you need to make an educated decision, as real estate will be one of the biggest investments in your life.

In Canada, you can put as little as 5% of the purchase price as a down payment on a home. However, if you provide any less than 20% of a down payment on the purchase of a property, you will be required to obtain mortgage default insurance. We always recommend providing 20% for your down payment if possible to avoid this additional expense. When purchasing land, you may have to put down as much as 35-50% to meet a lender’s down payment requirements.

As a first-time home buyer in Canada, you have access to a variety of home buyer incentives – take advantage of them! If you’re unsure what you qualify for, take a peek at our educational First Time Home Buyer page.

Likewise, we are always available to talk on the phone to simplify the process for you. Book a free consultation with one of our team members to ensure you’re prepared to purchase your next dream home.

Regarding land or property in Ontario, a great place to start is by taking advantage of our industry-leading affordability calculators.

Once you understand what you can afford in a home, we recommend filling out our mortgage application. After the application is complete, our team will work to get you a mortgage pre-approval.

We will determine the best options for your mortgage product based on your income, credit score, monthly debts and down payment availability. There are a wide variety of products, and depending on your financial situation, appetite for risk and debt servicing capabilities, we will discuss these options with you.

The next step is to work with a realtor to find your dream home or piece of land. If you do not have a realtor to work with, contact us, and we will gladly recommend an expert.

Once you find your property and make an offer, hopefully, it’s accepted! If not, continue searching for the perfect home or vacant land until you find another appropriate property.

Understand the closing costs that are associated with purchasing a home. These generally include land transfer tax, legal fees and other costs such as moving. The general rule of thumb is to have at least 1.5% of your purchase price ready for closing costs. If you are purchasing a home or vacant land in a primary market like Toronto, we recommend closer to 3% to be safe.

Land transfer tax will be the largest cost associated with your purchase. If you need help with budgeting, we offer a helpful guide to buying land in Ontario and established properties — and will always be happy to calculate the land transfer tax and other fees for you.

No one wants you to overextend yourself financially – not us, not the banks and lenders, and certainly not you. As such, a pivotal first step when buying or building a house in Ontario is to determine what you can afford. Don’t worry, it’s a simple process. By keying in a few answers and clicking a few buttons, you’ll get a good sense of how much home you can manage.

Simply use our affordability calculator or consider starting your mortgage application to determine what you can afford.

The minimum down payment required to buy a home or vacant land in Canada is 5% of the overall purchase price for homes up to $500,000. For every dollar of the purchase price above $500,000, you’ll need to have 10% down. For a purchase price of $750,000, the minimum down payment would be:

$500,000 x 5.00% ($25,000) + $250,000 x 10% ($25,000) = $50,000

Any home purchased for $1,000,000 or more requires a 20% down payment. This is $200,000 based on a $1,000,000 purchase price.

If you are buying land WITHOUT plans to build a qualifying home (in the eyes if CMHC), you may need to put a higher down payment – as much as 35-50%.

Remember that first-time homebuyers are eligible for down payment help through various federal programs, including the Home Buyers’ Plan and the First-Time Home Buyer Incentive.

Mortgage default insurance is a mandatory cost for homebuyers with down payments between 5.00% and 19.99% of the purchase price of their home. Often referred to as mortgage default insurance, this additional fee generally ranges between 2.80% – 4.00% of your overall mortgage amount. This type of insurance serves a dual purpose: it makes homeownership more affordable for homebuyers and protects lenders from defaulted loans.

Essential Tip: While most of the insurance premium can be added to your loan amount, the tax on this premium is usually due at the closing of your mortgage. If your mortgage insurance premium is $15,000, the PST added is 8%, and this means that $1,200 would be due (to your lawyer to remit to CMHC) in addition to your down payment.

As with any loan, your credit score can affect your eligibility to own a home or vacant land in Canada. Canadian homebuyers with a credit score of 700+ are generally considered low-risk candidates and are more likely to be approved for a mortgage with a better rate.

While that’s not to say you can’t obtain a mortgage with a lower credit score, you may be subject to a higher interest rate and potential lender or broker fees. Borrowers with credit scores as low as 400 can still get home mortgages at affordable rates, but we’d need to demonstrate a plan to improve this score to be offered mortgage products.

While both will give you an idea as to how much home or the type of vacant land you can afford, there are some significant differences between the two:

Pre-Approval

A lender will take a high-level view of your current income, debt and assets and come up with a ballpark figure as to how much they’d be willing to lend you (an estimate, not a guarantee) for your new home. One of the most useful benefits of pre-approval is a rate hold, which may protect against interest rate increases for 90-120 days.

Pre-Qualification

Our team believes pre-qualification is the most helpful tool in giving you the confidence to buy a new home, vacant land, or refinance your existing home. It’s a fantastic first step on your home buying journey.

During the pre-qualification process, we collect all your relevant information and documents to help us determine what you can qualify for with a higher degree of certainty. Although having a condition of mortgage financing in your offer to purchase is always safest, pre-qualification is the next best thing we can offer to allow you to assess the terms and products you are likely to be provided by our lenders.

Pre-approvals will generally lock you in at a rate that is much higher than the rate you would get from that same lender on a “live” deal. This is why we often recommend going for the route of pre-qualification. This will allow us to understand your entire financial picture and ensure that you are qualified to get a mortgage.

Most mortgage applicants will choose between a fixed and variable rate loan:

Fixed Rate
Your mortgage rate is locked in for a fixed term. Despite rising or falling market interest rates, you’ll pay a set monthly/weekly/bi-weekly amount on your home. This is an excellent choice for buyers with a specific budget and a low buffer room in their finances. It is a lower-risk option.

NOTE: If you need to break your mortgage term, there are hefty fees associated with this. A fixed term is not generally recommended if you intend to sell the property or move within a short period after the purchase.

Variable Rate
Your mortgage interest rate will vary along with the lender’s prime interest rate. This means you could pay less or more than the average fixed rate, depending on current conditions. This is a higher-risk option and better for clients with flexibility in their budget to allow for increases in the interest rate on their homes.

NOTE: The fee to break this type of mortgage will generally be 3 months of interest and is usually much less than that of a fixed term. If you intend to sell the property or move within a short period after the purchase, a variable term is generally recommended.

When it comes to buying a home in Ontario, there are several costs buyers should be familiar with before beginning the house-hunting process. The most common costs of homeownership are:

• Mortgage Payments
• Property Taxes
• Utilities
• Home Insurance
• Home Maintenance Costs

At Stonefield Mortgage, we know it can be overwhelming to determine what you can afford in today’s real estate market. That’s why we work directly with AAA, B, and private lenders to secure mortgage rates that meet you where you’re at financially — helping you take steps to achieve your short-term and long-term goals.

Stonefield Mortgage is proud to be a leading mortgage broker specializing in helping buyers purchase homes and vacant land in Toronto and across the GTA.

Our mortgage services are available in the following markets and MANY more:

• Vaughan
• Mississauga
• Brampton
• Etobicoke
• Pickering
• Ajax
• Aurora Oakville
• Markham
• Richmond Hill
• Scarborough
• Newmarket
• Whitby
• Toronto

The difference between buying a home and buying vacant land in Ontario, Canada, is the presence of a structure on the property itself. When you buy a home, you’re buying an existing structure that has already been built on a piece of land. Conversely, buying vacant land means you’re only purchasing the lot and will need to work with a contractor to design and build a home.

There are many considerations when buying land versus a home as the purchase of land usually requires a larger down payment and sometimes plans to build a home are required. You may have to put down as much as 50% of the price of the land if there is no structure on it currently.

If you want a pristine piece of Ontario, upon which you can build out your vision, chances are you’re buying land rather than a pre-existing structure. Buying land in Ontario is always a sound investment in your financial future. However, to secure the right mortgage, it’s essential to know what kind of land you’re after. Here are the two types you need to know (the third, Crown Land, isn’t worth mentioning here).

Vacant Land: This land often includes existing necessities, such as access to power, water, and septic. Since this land is primed for development, it may be listed at a higher price point than raw land.

Raw Land: Raw land is typically undeveloped and found in remote municipal areas. In some cases, road access may not be available. While development costs will likely be higher, buying cheap land in Ontario is easier when the land is considered raw.

At Stonefield Mortgage, we work with buyers to determine their mortgage capabilities and which type of land is accessible to purchase.

Contact our team today to set up a free 15-minute consultation.