Purchasing a condo in Toronto is not an easy task. The simple fact of the matter is it takes a considerable amount of upfront funds.
The average sales price for a 1 bedroom condo in Toronto as of December 2018 is $515,000 (source: Zolo).
With prices above $500k, unless you are paying the entire amount in cash, you will most likely require a lender to assist you in coming up with the majority of the funds outside of your deposit. The more deposit you have saved the less mortgage you will need, which makes it easier for lenders to qualify you.
In today’s current lending landscape the minimum down payment required to purchase a condo property in Toronto is:
- For homes that cost up to $500,000, the minimum down payment is 5%
- For homes that cost more than $500,000 and less than $1 million, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance
- For homes that cost $1 million or more, the minimum down payment is 20%
The amount of your down payment affects the type of mortgage you can get
Everyone’s goal should be to obtain a conventional mortgage, which means a minimum of 20% down of the property value. The reason for this is because if you put down less than 20% to lenders your mortgage is considered a high-ratio mortgage, which means that you might be subject to purchasing additional mortgage default insurance which means more money out of your pocket.
If your down payment is less than 20%, you will need to buy mortgage insurance through agencies like the Canada Mortgage and Housing Corporation (CMHC)
The insurance premium can be paid when you purchase it or you can add it to your mortgage total. The amount you pay depends on the amount you are borrowing and can range from 0.6% to 4.5% of the mortgage amount.
Here are examples of the minimum down payments required whether you decide to purchase an existing cond (resale) or a pre-construction condo.
Resale Condos
Our previous example and calculate the amount of deposit you will need to purchase that $515,000 condo. The total minimum deposit will be $26,500 ($25,000 for the first 5% and then $1,500 for the remaining 10%). Let’s also calculate the down payment needed for the average 2 bedroom and 3 bedroom properties in Toronto.
| Home price | $515,000 | $672,000 | $706,000 |
| First $500,000 x 5% | $25,000 | $25,000 | $25,000 |
| More than $500,000 and less than $1,000,000 x 10% | $1,500 | $17,200 | $20,600 |
| More than $1,000,000 x 20% | N/A | N/A | N/A |
| Total down payment | $26,500 | $42,200 | $45,600 |
Pre-Construction Condos
Deposit structures for pre-construction condos are a little different. Most condo developments will not require you to pay all of your deposit up front, but instead, allow you to pay your deposit over time. A typically deposit structure to secure a unit might be $5,000 down, and then the remaining 15-25% over time.
Although every contract is different, the typical deposit structure might look like:
- $5,000 upon signing the contract
- 5% of the purchase price minus the initial deposit within 30 days
- 5% of the purchase price within 60 to 90 days
- 5% of the purchase price within 90 to 180 days
- 5% at occupancy
Builders need deposits because they also borrow funds. Builders need to collect 15% in deposits and have 70% of the units sold before lenders will release funds in order to start construction.
Let’s take our previous example of a 1 bedroom condo at $515,000 and see what it might look like if you were purchasing a pre-construction condo where the builder requires a 20% deposit.
- $5,000 with the offer
- 5% of the purchase price minus the initial deposit ($20,750) within 30 days
- 5% ($25,750) within 60 to 90 days
- 5% ($25,750) within 90 to 180 days
- 5% ($25,750) at occupancy
In this example, you will have paid $103,000 (20%) by the time you occupy your condo.
There may be times where builders will offer units with deposits of only 10-15%, and some (very rare) may only require a 5% deposit! This is when it pays to work with someone like me who can send you those options when they become available.
Investment Condos
If you are interested in purchasing an investment condo where you do not intend to live in and will rent out immediately those units are typically not eligible for anything less than a 20% deposit.
*As always, the best person to contact would be a lender or mortgage broker you trust to get more detailed information.
Do you have any questions about down payments? Call, text, or email me anytime!
