With the average price of new homes in the Greater Toronto Area (GTA) still seemingly too high for first-time buyers, we understand if you’re having some second thoughts about calling Toronto home. But, don’t start packing your bags for the east coast just yet.
We have a few reasons why first-time buyers should still consider buying in Toronto and the GTA!
The new stress test really isn’t that scary
At the beginning of this year, a new stress test kicked in for uninsured mortgages, meaning even if you put 20% down on your new home, you’d still have to undergo a stress test to qualify for a mortgage.
The thing is, insured mortgages already had to undergo this stress test! Many first-time buyers don’t/can’t put 20% down, which requires the Canada Mortgage Housing Corporation (CMHC) to insure your mortgage.
The stress test is in place to ensure you can afford your mortgage if interest rates rise. It weakens your borrowing power, but that’s not necessarily bad – it’s just a precaution to prevent you from getting into a situation where you can’t afford your home.
There are options for you
When you hear that the average new condo unit in the GTA costs more than $700,000, you probably sink into your chair a little bit. How can you possibly afford a new condo if that’s the average price?
Don’t worry, it’s just an average. That means there are units that are way more expensive and units that are way more affordable. For example, Daniels is launching DuEast Boutique in Toronto this spring with prices starting from the mid $300,000s.
They also have a BOOST program that turns your 5% down payment into 15% with a 10% payment-free and interest-free loan. Toronto has options for you, you just have to find them!
Staggered deposit structure
If you buy resale, you’re expected to have your down payment all at once. When you’re buying new construction, the deposit is usually staggered over a period of time. For example, some condo developers require a few thousand dollars upon signing the Agreement of Purchase and Sale, and then have 5% payments scheduled leading up to your closing.
This can give you plenty of time to save if you buy early enough! It can take a condo two or more years to get built, so even if you don’t have the final 5% payment yet, you have time to save for it. Keep in mind you should only do this if you’re confident in having the money at the time your cheque will be deposited.
The rental market is scary too
Being afraid or hesitant to realize your dream of homeownership is one thing, but if you’re renting in Toronto right now, you know that’s a scary scene too. Supply is low so rents are high, and with new rent control measures, condo investors may be taking a step back, which will further limit supply.
Use the tight rental market to inspire you to save up for your down payment!