First-time homebuyers — seriously evaluate your ability to carry a home. It is not inexpensive, and alongside your down payment, you must consider OLTT (Ontario Land Transfer Tax) for any purchase in Ontario and TLTT (Toronto Land Transfer Tax) on top on your OLTT for any purchase in the Toronto boundary.

I would suggest a minimum of 1% of your purchase price accessible on an averaged annual basis for upkeep for a home. It might be $0 one year and the following year it could be your windows needing replacement. Average above what you anticipate and be prepared for it. This is obviously much less with condos but be CERTAIN that you understand what the financial situation of the condominium corporation is, before you buy. Unexpected special assessments to top up a condo corporation’s bank account can be devastating if you are not prepared for it.  

Your current lease might be substantially under market rents and for that reason you may be living far less expensive than someone beginning a new lease at your current place. Perhaps you should stay in your lease? It seems strange, but how many Realtors have told you that you should consider staying put even if it meant the  Realtor would not be paid to help you find a home? If my only concern is your well-being, and staying put makes more sense if the numbers don’t add up, then I have done my job. You are more than just a paycheque to me.

That said, I only suggest this if you are willing to look at purchasing an investment property outside of the Toronto area. It makes sense to be leasing a property if someone is leasing something from you and you are creating equity from your investment property while you pay down someone else’s mortgage.

Some fun math:

$1,000,000 purchase

Down payment: $200,000

OLTT: $16,475

TLTT: $16,475

Legal: $2,500

Mortgage payment (@3.99%): $4,204 monthly

Taxes: $350 monthly

1% suggested annual maintenance fund ($10,000/12): $833.33

To buy your $1,000,000 home in Toronto, after spending $200,000 on a down payment and $42,350 in closing costs, your monthly payments will run you $5,387.33 before you have fed your family, paid for a vehicle, looked at insurance, clothed yourself or saved anything for the future.

Your $1,000,000 purchase, if you ever wanted to get out of it within the first few years for any unforeseen reason, would require hiring a Realtor, for conversation sakes, at 4% commission. If you add the $42,350 you spent in closing costs to the additional 4% commission required to sell the property onward, you would need to see a future selling price of $1,084,000 ballpark to break even on your $1,000,000 home.  Oh … and your lender would probably have some early breakout penalties to be applied for your mortgage not reaching full term.

I am not trying to dissuade you in any way. I am trying to be real with you — this is a massive decision in Toronto that requires serious thought and discussion. If you currently have a lease and are realistically under market rents — and substantially less than the $5,387.33 mentioned above — staying put has actually become a very intelligent option.

That said, I am an enormous believer in what real estate creates for personal wealth and I would suggest deploying what you have saved into a nearby market where the numbers do make sense. If someone is creating wealth for you by chewing down your mortgage, while you increase your equity somewhere that is a good fit for your goals, while you do the same for someone else, then great!