Ontario is at the center of Canada and is the highest populated province with around 38.3 percent of the Canadians living there. By area size, it is the second-largest province out of all the thirteen Canadian provinces after Quebec. Ontario is also home to the capital of Canada, Ottawa, and it also has the most populated city in Canada. So, if you are looking to buy a house in Ontario, this article would help you to know what the Ontario house down payment would be!
Buying a house is the most important decision that we take in our lives. It involves managing finances and securing an amount for the down payment. Also, an Ontario house down payment is going to be higher for you as three of the most expensive cities to buy a house are in Ontario, namely Toronto, Ottawa, and Hamilton.
Let us get into the down payment requirement in Canada.
Minimum Down Payment Needed to Buy a House
|House Rate||Minimum Down Payment|
|Less than $500,000||5 percent of the house purchase rate|
|Between $500,000 to $999,999||5% of the first $500,000 of the house purchase rate|
10% for the portion of the house purchase rate above $500,000
|More than $1 million||20% of the purchase price|
For example, if you want to buy a house that is priced at $700,000, you would have to pay $25,000 ($500,000 x 5%) and $20,000 ($200,000 x 10%). So, the total down payment would come at $45,000. Also, as your down payment amount is below 20 percent, you would also have to purchase mortgage insurance, which is quite expensive.
Buying a House in Ontario
As stated earlier, buying a house in Ontario is expensive, but it depends on the city you chose to live in.
|City Name||Household Income Needed |
for Non-condo Resident
|Household Income Needed |
for Condo Resident
As you can see, if you want to buy a house in these three cities of Ontario, this is the minimum household income you would need to have annually. While the years needed to save for a down payment in these cities are cited below.
|City Name||Months to Save for a |
|Months to Save for |
|Toronto||289 (24.08 years)||51 (4.25 years)|
|Hamilton||63 (5.25 years)||37 (3.08 years)|
|Ottawa||39 (3.25 years)||22 (1.83 years)|
Tables’ information sourced from Better Dwelling
There is a drastic difference in saving for an Ontario house down payment depending on the city as you can see. Toronto is way too expensive while Hamilton and Ottawa are still reasonable when it comes to a non-condo house.
Ontario House Down Payment Need
As per the Canadian Real Estate Association, the house price in Ontario in March 2020 was $685,430, while for March 2021 it has reached $890,035. It is a year-on-year growth of 29.9 percent. It is even higher than the average Canadian house price of $716,828 in 2021.
So let us see if you buy a house that is worth $890,035 in Ontario, what would you need to pay as the minimum down payment.
House Value = $890,035
Down Payment till $500,000 is 5% = $25,000
While on the rest of the $390,035 = $39,0003.50
So the total down payment would be = $64,003.50
It is quite high. Also, other charges like Land transfer taxes, closing costs, insurance charges are not even included in it.
Though there are also cities in Ontario, where buying a house is not that costly.
|City Name||Average House Value in 2020|
Source: Paradise Development
For example, let us take Windsor to calculate the down payment needed.
Average price = $363,521
Minimum down payment needed = 5% = $18,176
$18,176 is way lower than $64,000. So, the city you choose in Ontario would significantly impact your Ontario house down payment.
The Difference Between 5% and 20% Down Payment
While some people prefer to pay the minimum down payment of 5 percent, paying 20 percent has its own benefits.
When you pay 5 percent as a down payment, you certainly need less capital, while a 20 percent down payment is quite a huge amount. For example, for a house costing $499,999, you would pay $25,000 as 5 percent. But if you chose to pay 20 percent, you will need $100,000. That gigantic amount is not possible for everyone.
Mortgage Insurance Payment
If you pay a minimum down payment, you need to buy separate mortgage insurance for which you have to incur additional cost. But when you pay 20 percent initially, you can escape from buying that.
Mortgage Interest and Instalment Amount
When you pay the minimum down payment at the initial level, you need to buy more like a mortgage loan, and a higher amount would also lead to a higher monthly installment. While the situation is the opposite if you pay a 20 percent down payment. Though in that case, your initial capital would also be high. Also, the interest rate is higher for a 5 percent down payment house.
If you pay a 5 percent down payment, you need to pay off the debt by 25 years, but if you pay a higher amount, your mortgage tenure can be beyond 25 years. Also, you can buy a house worth more than a million.
Things to Keep in Mind to Save for an Ontario home Down Payment
You can follow the below steps to fasten your down payment savings and achieve the dream to buy your own house in Ontario.
Select an Affordable House
As you read in this post, while a few cities have skyrocketing prices for an Ontario house down payment, there are affordable cities as well. Also, even if you choose an expensive city to live in, you can choose the condo type of homes to save money. So, cater to what you prefer and what is available in your budget and make a decision keeping in mind your future.
Make a Budget and Stick to it
It is better to start early to buy a home. Once you get a stable job, you should open a recurring account that deducts a certain amount from your savings to secure a down payment. This will reduce your last-minute stress. You can also make a budget and cut up unnecessary costs to save better.
Check Out the First Time Home Buyers Programs
There are so many benefits programs undertaken by the Canadian government like First Time Home Buyer Incentive, Home Buyer’s Plan (HBP), GST/HST tax rebate, land transfer rebate, etc. You need to be informed about this and apply for as many benefits as you can.
Decide the Mortgage Size and Monthly Instalment
Pre-decide the down payment you are going to pay. And start saving money accordingly. Also, keep in mind that your down payment would impact your mortgage and monthly installments. So, choose wisely by considering all the possibilities.
Calculate the Insurance Amount
If you are paying between 5 to 20 percent, you need to buy a Canada Mortgage and Housing Corporation (CMHC) mortgage insurance. The more amount you will pay as a down payment, the lesser would be your initial sum.