Buying a Condo in Toronto

Buying a Condo in Toronto

The Toronto condo market has yet to show any signs of cooling down, as demand for condos and other real estate has escalated over the last few years. From small family homes to large and mid-sized condos, there’s a growing need for property in the Greater Toronto Area. There are so many advantages to condo living such as saving money and ideally seeing a large return on your investment when the time comes to sell your condo, being able to live in a more desirable neighbourhood, proximity to public transportation, restaurants, and more. 

So even if you’ve been considering the last few months to jump into the property market, either to purchase an investment opportunity or perhaps a principal home for yourself, here’s a step by step guide to buying a condo in Toronto.

Step 1: Prepare the important paperwork. Before doing anything, you will want to get started on the mortgage pre-approval process. In this process, your broker will need a few documents from you, including:  

  • A full credit check (the lender will run this report for you)
  • An employment letter (stating your status, start date, position and salary)
  • Last year’s T-4 (verifying your income)
  • The previous year’s Notice of Assessment (NOI), confirming that your income taxes were paid. If you didn’t file your taxes last year, you won’t be able to get a mortgage.

Step 2: Get your down payment together. You’ll need at least 5% of the purchase price as a down payment to buy a condo under $1 million, and a 20% down payment for condos priced over $1 million. You will need to make sure the money is available to you and liquidated for your closing date. If part or all of your down payment is being gifted, your lender may require that it’s in your bank account for a minimum number of days (and the bank will request a letter from the person who gave you the gift). It is also important to note that if your down payment is coming from outside of Canada, it’ll need to be in your bank account for at least 90 days before closing.

Step 3: Make sure your deposit is ready to go. A deposit is paid by the Buyer on the successful agreement of the purchase/sale of a home, and forms part of the final purchase price.

In real estate, a deposit provides security to the Seller – A deposit ensures that the Buyer has a stake in the agreement and something to lose if they walk away and refuse to close on a purchase. In Ontario, a deposit is usually paid by bank draft, certified cheque or money order. You’ll need to provide a deposit (usually 5% of the purchase price in Toronto) within 24 hours of your offer being accepted (and possibly earlier if you’re in a bidding war). The deposit forms part of your down payment come closing time.

Step 4: Find out about Government programs and rebates. There are several programs to help first-time homebuyers buy a condo:

  • The Home Buyer Plan, where first-time buyers can borrow up to $35,000 tax-free from their RRSP (note: you have to pay it back within 15 years)
  • Land Transfer Tax refunds in both Ontario and Toronto
  • The First-Time Home Buyer Credit (a tax credit of up to $5000 to help defray closing costs, which results in a refund of up to $750)
  • CMHC loan insurance if your down payment is less than 20% and the purchase price of the home is less than $1 million.
  • If you’re buying a condo for under $565,000, you may be able to participate in the First Time Buyer Incentive.

Step 5: Get pre-approved for a mortgage. It’s essential to know how much you can afford before you start shopping or buy a condo, so getting pre-approved for a mortgage is an important step. Getting a mortgage for a condo is slightly different than getting a mortgage for a house:

  • Lenders will take into consideration the expected maintenance fees when determining how much you can afford.
  • Many banks won’t finance condo-hotels.
  • CMHC and most lenders have a secret list of condos they won’t finance, usually because of problems with the building.
  • Always put in a financing condition in your offer or talk to your lender before you make an offer.

Step 6: Educate yourself about closing costs. While the Seller likely pays your realtor’s fees, you’ll have to pay provincial land transfer tax, municipal land transfer tax if you buy a condominium in the city of Toronto. Other closing costs include legal fees, lender or appraisal fees (possibly) and any adjustments (for example, reimbursing the Seller for prepaid expenses.

Step 7: Educate yourself on the costs of owning a condo. Condo costs are slightly different than housing costs, some fees to consider in condos include:

  • Condo Maintenance Fees: Condo fees vary significantly between buildings. While maintenance fees will almost always include water, garbage, common elements and building insurance, they may or may not include hydro, gas and air conditioning. What’s included/not included in your maintenance fees can significantly change your financing options and monthly carrying costs. Note: condo fees generally increase each year. If you’re buying a brand new condo, you can expect the first few years of increases to be quite significant.
  • Other Expenses: You’ll also need to pay for home insurance, internet or cable, and property taxes.
  • Special Assessments: Sometimes, condos have unexpected or unbudgeted expenses that must be paid by the residents. These special assessments, while not that frequent, can be expensive. Find out the history of special assessments and have your lawyer review the status certificate for details. (The status certificate is the document that outlines the financial and legal guts of the condo).

Step 8: Get your team in place. Buying a condo is a team effort, and you’ll want to make sure you have the right team by your side:

  • Your Realtor – Your Realtor plays a critical role in making sure you buy the right condo, in the right neighbourhood – and of course, negotiating the price and terms of the agreement. Do your research before hiring a real estate agent – read online reviews and get recommendations from friends and family. Trusting the wrong agent could cost you tens of thousands of dollars and cause you a lot of grief.
  • Real Estate Lawyer – Your lawyer will review the status certificate, manage the closing and deal with any closing issues. Make sure to hire a lawyer who is experienced in helping condo Buyers. 
  • Mortgage Broker – Whether you choose to work with your current bank or bring in a mortgage broker to find you the best deal, involve them early in the process.

Step 9: Determine your needs and wants: Start by identifying your ideal neighborhood.  Condominiums can be found in almost every neighbourhood in Toronto, though of course there’s a massive concentration of them downtown. Do you want to live in the middle of the action or on a quieter residential street? How important is easy access to highways and TTC? You should also determine which type of condo you prefer. Condos vs Lofts vs Townhomes – Which one is right for you? 

In Toronto, condos are equipped with fitness centres, pools, 24-hour concierge, bowling alleys, massage tables, dog washing stations and billiards rooms; media centres, golf driving ranges, hot tubs, aerobics classes and more. Think long and hard about which amenities you will use – you’ll be paying for them every month as part of your condo fees.

Step 10: Get To Know the Market

  • Read up on market reports 
  • Familiarize yourself with sold prices in the area
  • Talk to your agent and understand what the sold prices and reports mean

Step 11:  Finalize Your Budget At this point, you should be pre-approved for a mortgage, so you know how much you can spend; you’ve become familiar with asking and sold prices in the neighbourhoods and buildings that interest you; now it’s time to decide: how much do you want to spend to buy a condo and start searching online.

Step 12: Start viewing condos with your realtor – Let the house hunting begin! Working with your REALTOR, you’ll be able to book private showings at the condos that interest you. When you find a building or condo unit that interests you, it’s time to do some due diligence. Your realtor will play a big role here, as will the status certificate that your lawyer will review after you’ve successfully negotiated an agreement of purchase. Here are some of the things to be on the lookout for:

  •  Developer Reputation – Who originally constructed the condominium? What’s their reputation and history with similar condominiums? Not all developers are great, and there are plenty of mediocre builders out there, who build cheap condos.
  • Quality of Construction – Just like there are good and bad developers, there are good and bad condo buildings – buy a good one. The quality of the construction doesn’t only impact appearance – it impacts maintenance, costs, noise and resale values. Work with a REALTOR who’s familiar with the condos and builders in your target area – they’ll have great intel about the buildings that may not be obvious to you.
  • Undesirable Features  – When shopping for a condo, look out for things that might detract from value – small windows and dark spaces with minimal natural light, bad odours coming from neighbouring businesses, bad views and noises from ground-level tenants or nearby garbage facilities.
  • Building History – You can tell a lot about how a condo is run by looking at its history. Is the progression of maintenance fee increases in line with what’s normal? Have there been special assessments? Lawsuits? Are they hiring a new property manager every year?

Step 13: Understand Offer Time + Closing. When it comes time to make an offer on a condo, all these steps will happen simultaneously. In the meantime, educate yourself about each phase of the offer and closing process. Determine an appropriate offer price, closing date, and which conditions you would like to include. Conditions are part of an offer to purchase and allow the Buyer time to complete their due diligence. These are the most common conditions seen in Toronto:

  •  Financing Condition – a condition that allows a Buyer to back out of a sale if they don’t obtain financing (usually 3-5 days long); click here for more details
  • Status Certificate Review Condition – a condition that allows a condo Buyer to have the condominium status certificate reviewed by their lawyer – usually the certificate must be provided within ten business days, and the lawyer has 1-3 days to review); click here for more details on the status certificate review condition.
  • Home Inspection Condition – while these aren’t common in condo purchases, a home inspection condition allows a Buyer to bring in a professional inspector to inspect the unit and back out of the sale if it isn’t satisfactory to them (usually 1-5 days, depending on market conditions). Note that condo inspectors can only inspect the unit and what is owned and controlled by the individual owner, so they won’t provide an opinion on electrical, plumbing, roofing, etc.

Step 14: The Offer Process – Your agent will prepare the offer, including your initial offer price, terms and conditions. It will be valid for a certain amount of time (we call this irrevocable period). Once you’ve signed off it, your agent will present the offer to the Seller’s agent/the Seller. The Seller can:

  • Accept the offer as-is  -They agree to the terms and conditions you’ve offered and sign it. Congratulations!
  • Sign back the offer with different proposed terms (for example, at a higher asking price, with a different closing date, etc.). This now becomes a counter-offer from the Seller back to the Buyer. This is the most common scenario–usually, several back-and-forth negotiations take place with each side making concessions until hopefully a mutually agreeable contract is reached.
  • Decline the offer If your offer is completely unacceptable to the Seller, they have the option of simply declining it–no negotiation, no anything.

Step 15: Closing. When I refer to ‘closing’, we mean the date that you take ownership and pay for the condo. A few days before the closing date:

  • Your condo home insurance policy needs to be ready
  • You’ll sign all the final paperwork with your lawyer
  • You’ll get title insurance
  • You’ll need to provide a certified cheque for the balance owing on your down payment
  • Your lender will advance the mortgage funds.
  • On closing day, the money will transfer to the Seller and ownership will transfer to you. At last, you’ll be able to pick up the keys to your condo. Congrats!

And that’s it! If you are considering the purchase of a condo, make sure to work with a qualified real estate agent to ensure proper research is done prior to making your decision.

I hope you found this information useful! As a realtor specializing in the Liberty Village and Toronto real estate market, I am here to help guide you through the entire buying or selling process. Grab a copy of my FREE Toronto guide by reaching out to me on the Contact page or on my social media. I look forward to speaking with you!