I recently met with buyers thinking they needed $200K to buy a house in Toronto. Their reality was that they didn’t. The down payment is a percentage of the purchase price. Your purchase price will depend on several factors, including your down payment, income, and affordability.
There’s a lot of confusion in the Toronto real estate market, and because I get this question often, I think it’s a good idea to provide some clarity.
The 3 Most Common Price Points
| Price Point | Typical Buyer Strategy | Minimum Down Payment | Total Income Needed | Monthly Payment (all-inclusive) | Cash Required (closing costs + down payment) |
|---|---|---|---|---|---|
| $600,000 | FHSA +RRSP + Gift | $35,000 | $95K- $115K | $3,400- $3,800 | $45K- $50K |
| $800,000 | Savings + Equity + Gift | $55,000 | $125K- $150K | $4,400- $4,900 | $75K- $85K |
| $1,000,000 | Equity from previous home + Gift | $75,000 | $160K- $190K | $5,500- $6,200 | $105K- $115K |
The table above shows that you don’t need $200K to buy a home in Toronto. The key is to start planning early and be strategic. In my experience, I typically see first-time buyer clients purchasing in the $600K–$800K range.
They often start with a condo, and depending on the geographic areas they’ll consider, a freehold house or townhome can be an option. At $1,000,000-plus, for first-time homebuyers, it’s rare; I have seen it happen, but only with help from family.
Why Income Matters More Than Down Payment
Your income is important because you will be stress tested when you qualify for a mortgage. You must qualify at 2% above the contract rate, or 5.25%, whichever is greater. The stress test was designed to protect consumers from defaulting on their mortgages if their interest rates increase in the future. Y
our lender will also use a debt-to-income ratio to determine how much mortgage you qualify for. Most lenders will work in the 39% (Gross debt service)-44% (total debt service) range. There are exceptions, but you need to consult a mortgage professional for full details.
These metrics assess your ability to manage debt and qualify for a mortgage. GDS (Gross Debt Service) is your before-tax income required to cover housing costs. The TDS (Total Debt Service) measures the percentage of your gross income to cover all your debt obligations combined, including your housing costs.
Going through this process is usually an “AHA” moment. In my experience, most buyers aren’t limited by their down payment; it’s by their income.
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Which Buyer Are You?
First-Time Buyer
Most of the people I work with in this category are in their late 20s to 40s. They either buy as a couple or sometimes individually. Their household income will generally range from $ 90K to $150K.
Often, they are renting, and their challenge is saving enough for a down payment while paying rent. The number one frustration I see is that home prices rise faster than people can save. Some other pain points I hear are:
- “How do I afford Toronto”?
- Monthly payment anxiety
- Competing against other buyers
They structure their purchase with a 5-10% down payment (I rarely see 5% down, but it does exist). The tools they use to save are: FHSA (First-Time Homebuyer Savings Account), Home Buyer Plan (RRSP), and sometimes family help.
Most of my clients enter the market by purchasing a 1-bedroom, a 1-bedroom plus den, or a small 2-bedroom condo, and their budgets range from $500K to $800K.
When working with first-time buyers in Toronto, it’s really important that I provide clarity on the numbers. We break down all the costs associated with buying their first home, especially closing costs, so they understand the net purchase price. I find these details important because these clients have never purchased a home in Toronto before, and don’t have experience with the process.
The Move-Up Buyer
The buyers in this category that I help are leveraging equity from their first home purchase, generally a condo, townhouse, semi-detached, or detached home. Most have gone through at least one 5-year mortgage cycle, and some have gone through longer cycles.
Many of the move-up buyers I work with have experienced career growth since they bought their first home. Their motivation for moving stems from growing a family and a lifestyle shift.
At this point, most of them want to move up to freehold properties, usually semi-detached and detached homes with more space and larger private yards. Those who love the condo lifestyle often want larger condos with outdoor spaces, such as terraces. Their budget ranges from $ 800K to $1.2 million.
They structure their move-up by leveraging their home equity, typically 20-40%. Since most will be going into a conventional mortgage (minimum 20% down), they no longer need to insure their mortgage, giving them more flexible financing options.
The biggest pain points these buyers face are:
- Timing: Sell first or buy first
- Fearing market shifts
- Managing two transactions
If you are in this category, great professional advice is mandatory. I always create an itemized plan and timeline for my clients to help their decision-making.
Looking for more tips on buying a house? Check out these other blog posts next!
Downsizer/Lifestyle Buyer
These buyers are often 55+, they are approaching retirement, or already retired, and want to change their lifestyle. Most of them are mortgage-free or have a small mortgage. Their priorities are changing, and they want a simpler home or something with better accessibility as they age.
Their budgets vary more widely because some have very specific requirements. The budgets range from $ 600K to $1.5 million. My clients in this category are mostly buying condos, bungalows, or homes in lifestyle communities.
Downsizers in Toronto generally have large down payments. Often, they make their purchase with cash, and no mortgage is required.
Their largest pain points are:
- Emotional attachment to their current home
- Overwhelmed with decluttering + moving
- Fear of making the wrong decision
In my experience, these clients put a lot of thought into this type of move, and are so happy that they wish they had done it sooner.
If you or your aging parent is in this category, having a realtor who specializes in these transitions makes a huge difference. It requires a special level of guidance and patience to work at your own pace. You want professional, trusted advice, without the pressure.
Whether you’re buying your first home or planning your next chapter, there’s no one-size-fits-all approach for your unique circumstance. If you want to know what this looks like for you, let’s talk.
Buying a home? I can help! Give me a call at 647.283.2127 or email stuart@stuartnodell.com to get in touch.
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