Understand your budget before buying your first home

How much of my down payment do I need ready for an offer?

Your agreement may call for a deposit with the offer or after acceptance. Have that amount ready by the written deadline. Your lawyer will tell you when to deliver the rest of the down payment and the closing funds.

Say you plan to put $100,000 down on an $800,000 home. If you pay a $20,000 deposit, you have $80,000 of your down payment left to provide. You don’t need $120,000 for the down payment. The $20,000 is an example, not a standard deposit.

Before signing, check the amount, deadline, recipient and accepted payment method. If a bank draft is needed, can you get one when your branch is closed? If your money is invested or in a registered account, ask your bank about withdrawal rules and timing. If family is helping, ask your lender and lawyer what documents they need before anyone transfers money.

Your planned down payment and your minimum down payment can be different. For a typical owner-occupied resale house or condo, the federal minimums are:

• Price up to $500,000: 5% of the price.
• Above $500,000 but below $1.5 million: 5% on the first $500,000, then 10% on the portion above it.
• At $1.5 million or more: 20% of the price.

On the $800,000 example, that minimum is $55,000: $25,000 on the first $500,000 plus $30,000 on the remaining $300,000. Ask your lender what your purchase requires.

How much should I set aside for closing in Toronto or Markham?

Start with the address. Both cities have Ontario land transfer tax. A property inside the City of Toronto also has Toronto municipal land transfer tax. A Markham address does not attract the Toronto tax, even if you currently live in Toronto.

The last row assumes the full Ontario refund of $4,000 and, in Toronto, the full municipal rebate of $4,475. Age, citizenship or permanent residency, past ownership and occupancy rules matter. If you are buying together, tell your lawyer who has owned a home, where and when, including any ownership by a spouse.

If those full benefits apply at closing, your $80,000 remaining down payment plus land transfer tax comes to $88,475 in Markham or $96,475 in Toronto. You still need to add your other purchase expenses.

• Ask your lawyer for an estimate covering legal fees, registration, title insurance and adjustments. For example, you may owe the seller for property taxes they prepaid for the period after you take ownership.
• With less than 20% down, you generally need mortgage loan insurance. The premium may be added to the mortgage, but Ontario sales tax on that premium cannot. Ask your lender how much cash to set aside.
• Include any inspection, appraisal, condo document costs and brokerage fees you owe under your agreement. Note which bills are due before closing. Keep moving costs and money for immediate repairs separate.

The example excludes administration fees, other closing costs and any additional taxes specific to a buyer. Your lawyer can confirm your eligibility, the final amount and the date funds are needed.

What will this home cost me each month?

Pick one home you would actually consider. Use the lender’s estimated mortgage payment, divide the annual property tax by 12, and add home insurance, utilities, any condo fees and an amount for maintenance and repairs.

If you’re comparing a Toronto condo with a Markham townhome, use each property’s figures. If either property has condo fees, do they include heat or water? Will one address add a transit pass or parking expense to your commute?

Try replacing rent in your current monthly budget with the full cost of owning that home. After groceries, debt payments, transportation and savings, what do you have left? Use that answer alongside the amount your lender says you can borrow.

What should I do before I start looking?

Write down four figures: the deposit you can access on time, the rest of your planned down payment, your estimated purchase expenses and the monthly cost you feel comfortable carrying. Keep an emergency cushion outside the money you plan to spend.

The first three steps overlap: understand your budget, explore buyer programs and get mortgage-ready. Check your first-time buyer program options while your lender reviews your numbers. My guide to mortgage preapproval and final approval explains what still needs checking once you find a home.

You don’t need to have every number worked out before we talk. Bring your preferred area, timeline and the cost you’re least sure about. We can go through what to expect and which questions to take to your lender or lawyer.