Dissecting a purchase in Toronto.
Friday Jan 27th, 2017Share
In 2016, an average price for detached homes in Toronto reached an outrageous price of $1.2 mil.
On top of all new regulations allegedly introduced to calm down the market, it has become extremely difficult to find a property under $1 million in Toronto. If your desire is to live in Toronto then you have to be flexible, patient and practical. There are not many choices but to look into condominium living, find a fixer upper or look into the neighborhoods located further from the center of Toronto. One of this neighborhoods may still be the Scarborough; however, even there property prices are quickly increasing.
If you’re actively looking for a house in #Toronto, here is a semi-detached backsplit house in L'Amoreaux neighborhood. http://www.homesbyolesa.com/8-andes-rd-e3683311
Highlights: 4+1 Bedroom house in a move-in condition, fully renovated with brand new appliances, new windows and new entrance door, with a private In-Law suite.
Curious to know what it will take you to buy this house and how much will be your monthly mortgage payments and your closing costs? Keep on reading!
Listing/Asking Price $898,888
Property taxes: Annual $2,848.21 (2016), Monthly $237.35
Minimum Downpayment*: $64,888 (5% on $500,000 =$25,000 plus 10% on $398,888=$39,888) or 7.22% of asking price.
Mortgage Default/Loan Insurance**: $30,024 added to the mortgage.
Total Mortgage: $864,024= $898,888 - $64,888 (down) + $30,024 (default insurance)
Your Monthly Mortgage Payment: $3,948
25 Amortization Period***, 2.7% (current prime rate), 5-year fixed term****.
Gross Total Monthly Payment: $4,185 = $3,948 (mortgage payments) + $237 property taxes monthly.
In 5 years when it’s time to renew your mortgage (considering you never pre-paid any extra amount in addition to your monthly payments), your outstanding balance to be refinanced/renew will be $732,577.
You would repay a lender $131,447 of the mortgage principal and$105,450 in interest. Basically, your lender’s gross profit for financing your house for 5 years would be $105,450.
One Time Closing Costs include: legal fees and disbursements, prepaid utilities and property tax adjustments, title insurance. And, of course the biggest one time cost will be the Land Transfer Tax.
Provincial land transfer tax for this transaction will be $14,453 ($4,000 instant rebate for the 1st time home buyers).
And since the property is located in Toronto, add the Municipal Land Transfer Tax: $13,703 ($3,725 instant rebate for the 1st time home buyers)
Total Provincial & Municipal Land Transfer Tax: $28,156 or $20,431 for the 1st time buyers
In addition, don’t forget to budget for home inspection starting from $450 depending on the square footage, moving costs, home owner insurance, and other costs.
In general, I advice my clients to be ready to spend for closing costs from 2.5% to 4% from the selling price.
Please be advised that above scenario will not be the same for everyone. The calculations will change, if you can put 20% down payment, in which case you will totally avoid paying the mortgage default insurance.
Your interest rate could be lower or higher depending on your credit score, credit history, consumer and other debts outstanding.
*As of February 2016, the federal government introduced new mortgage rules intended to “cool down” the real estate markets in some areas by requiring buyers to put down more than 5% on a home worth half a million dollars or more: New blended rate is 5 per cent down on the first $500,000, and 10 per cent down on any dollar value above that amount.
** Mortgage Default Insurance is financed through your mortgage and is mandatory for the down payments up to 19.99%. Unlike the Closing Costs, it does not require a lump sum cash outlay at the time of your purchase. Instead, Mortgage Default Insurance Premiums will be increased as of March 17, 2017 and added to your mortgage amount and paid off over the life of your loan. Cost to homebuyers 1.80% - 3.60% (as of June 1, 2015) of the mortgage amount. And 2.40% - 4% (as of March 17, 2017)
***Amortization period: The total length of time it will take you to pay off your mortgage. If your down payment is less than 20% of the purchase price of your home, the longest amortization period allowed is 25 years. If it’s 20% or more than the longest period period allowed is still 35 years.
****Mortgage Term: The length of time you commit to the mortgage rate, lender, and associated mortgage terms and conditions. The term you choose will have a direct effect on your mortgage rate, with short terms historically to be lower than long-term mortgage rates. When the term is up, you must either repay the outstanding mortgage amount or renew your morgage at a new rate available at the end of the term.
Olesa Islamova, Real Estate Sales Representative | Realtor®
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