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LowestRates.ca: Conventional rates vs. High Ratio rates

On LowestRates.ca, customers can start an application for a number of different mortgage products. The two main types of mortgages you may apply for include conventional mortgages and high-ratio mortgages. A conventional mortgage means that the homebuyer has put at least 20% of the property’s purchase price down. With this type of mortgage, the homebuyer does not have to purchase mortgage insurance from the CMHC. A high ratio mortgage, on the other hand, is where homeowners put down less than 20% of the purchase price as a down payment, which means they’re required to purchase mortgage insurance from the CMHC. Below, you’ll see a comparison of high ratio mortgages and conventional mortgages in Ottawa.

Conventional mortgage rates in Toronto vs. high ratio mortgage rates in Toronto

MonthAverage Conventional RateAverage High Ratio Rate
04/202.87%2.68%
05/202.47%2.31%
06/202.34%2.21%
07/202.11%1.96%
08/202.00%1.84%

Last Updated: October 9th, 2020

Our 5-year fixed rates vs. our 5-year variable rates

If you decide to apply for a mortgage through LowestRates.ca, congratulations! You’re likely going to get the best mortgage rate available and save thousands of dollars. But we have more good news for you.

Variable rates are historically lower than fixed rates. Over the past year though, they’ve been almost equal. Fixed rates have actually averaged out to be a fraction of a percentage point lower. Since January 2019, 67% of our users went with a fixed-rate mortgage and 33% went with a variable rate.

Average 5-year fixed rates vs. average 5-year variable rates from LowestRates.ca.

MonthAverage LR 5-year fixed rate in TorontoAverage LR 5-year variable rate in Toronto
09/192.33%2.64%
10/192.42%2.64%
11/192.28%2.67%
12/192.40%2.69%
01/202.53%2.70%
02/202.43%2.68%
03/202.32%2.13%
04/202.68%2.27%
05/202.35%2.07%
06/202.22%2.01%
07/202.01%1.81%
08/201.89%1.77%

Last Updated: October 9th, 2020

Focus On

Toronto Housing

The housing market in Toronto has been booming for years. Prices for single-detached family homes averaged well over $1 million during every month of 2019 and into 2020. By August 2020, the average price of a single-detached home in Toronto g $1.5 million. Other forms of housing, such as townhomes and condos are also shooting up in price: the average price of a condo reached $700,00.

Take a look at the graphs below to get an idea of how the housing market in Toronto has changed in the past 12 months.

Single-detached home, condo and townhouse prices in Toronto proper

 Single-detachedTownhouseCondo
11/19$1,352,365$896,320$641,490
12/19$1,366,603$963,513$638,665
01/20$1,317,828$926,918$629,837
02/20$1,243,810$871,812$619,113
03/20$1,261,522$841,285$617,532
04/20$1,351,549$931,040$645,246
05/20$1,330,051$962,263$659,563
06/20$1,357,986$932,857$657,981
07/20$1,345,275$856,499$655,550
08/20$1,411,535$945,557$681,313
09/20$1,478,219$1,025,316$722,658

Last Updated: October 9th, 2020

Source: Zolo

 

Single-detached, condo and townhouse prices in the Greater Toronto Area

 Single-detachedTownhouseCondo
11/19$1,136,991$772,966$620,253
12/19$1,133,041$768,714$617,843
01/20$1,103,259$744,095$613,095
02/20$1,174,907$776,292$638,372
03/20$1,223,070$816,439$670,997
04/20$1,148,736$787,366$637,082
05/20$1,125,877$781,499$609,678
06/20$1,205,412$823,263$638,325
07/20$1,238,523$838,648$640,328
08/20$1,258,559$875,965$640,954
09/20$1,262,586$843,285$635,902

Last Updated: October 9th, 2020

Source: Zolo

It’s not just home prices in Toronto proper that are soaring. The housing market is also heating up in the Greater Toronto Area. This can partially be attributed to a lack of housing availability in the city as well as the sky high prices we’re seeing in downtown Toronto communities.

While homebuyers in the GTA will still pay a bit less for a single detached home, townhouse or condo than their Toronto neighbours, that gap is quickly shrinking. At the beginning of August, 2020, the average price of a single detached home in the GTA rose above $1.2 million.

Your Toronto mortgage questions, answered.

What’s the difference between a variable and fixed mortgage?

While variable rates and fixed rates on LowestRates.ca are closer than they’ve ever been in years, there are some key differences to be aware of.

A fixed rate stays the same for the duration of your mortgage. A variable rate, on the other hand, means that your rate won’t stay the same. Your lender will adjust it based on market conditions. In 2019, 67% of homebuyers in Toronto opted for a fixed rate while the other 33% selected a variable rate.

What’s the difference between a mortgage term and an amortization period?

Mortgage term: A mortgage term is the length of time you’re committed to your mortgage rate, lender and the terms and conditions of your mortgage contract. The most popular mortgage term in Canada is five years, though terms can range from six months to 10 years. At the end of your term, you’ll renew your mortgage contract for the remaining principal at a new rate.

Amortization period: The amortization period and the mortgage term are often confused. While your mortgage term refers to the duration of your mortgage contract, the amortization period refers to the duration of your entire mortgage. In other words, the length of time it will take you to pay off your mortgage principal and interest. In Canada, the maximum amortization period is 35 years, but if your down payment is less than 20%, you’ll be required to purchase mortgage insurance from the Canadian Mortgage and Housing Corporation. If your mortgage is insured, your maximum amortization period is 25 years.

How much does it cost to live in Toronto?

Toronto is one of the most expensive cities in the country to live in. LowestRates.ca calculated the cost of living in the City of Toronto depending on whether you own a home, rent, drive or take public transit.

We found that in order to own a home in the city, residents will pay over $4,000 per month in housing costs, not including the land transfer tax that’s paid in full at the time of the transfer of the deed. In order to own a home and a car in the city, residents will need to earn $94,000 before taxes. Residents who own just a home and opt to take public transit will need to earn at least $88,000 per year.

What other costs are involved with buying a house in Toronto?

In addition to your mortgage rates, Toronto homebuyers will also need to think about these additional costs that come with purchasing a home in the city:

Down payment: A down payment refers to the amount of money you’ll pay a seller upfront. In Canada, you’re legally required to put down a specified percentage of your home’s total home price. Here are the rules according to the federal government:

  • A home that costs $500,000 or less - 5% of the purchase price
  • A home that costs $500,000 to $999,999 - 5% of the first $500,000 of the purchase price, and 10% for the portion above the purchase price above $500,000
  • A home that costs $1 million or more - 20% of the purchase price

Land transfer tax: The City of Toronto charges homebuyers a municipal land transfer tax on top of the provincial one. To date, Toronto is the only city that does this. On a home worth $1 million in Toronto, the homebuyer will also pay $32,950 in land transfer taxes; $16,475 in municipal taxes and $16,475 in provincial taxes.

Tax credits: There are a number of tax credits you may be eligible for when purchasing a home. They include:

  • The Federal Home Accessibility Tax (HATC) for Seniors and Persons with Disabilities: This non-refundable tax credit is available for homeowners who are aged 65+ before the end of the tax year or who have a disability. This credit allows you to claim up to $10,000 in renovation expenses. This credit is applicable country wide.
  • First Time Homebuyers Tax Credit: This is a $5,000 non-refundable tax credit designed to help buyers manage the closing costs of purchasing a new home. This credit is applicable across Canada.

Home insurance: While home insurance technically isn’t legally required in Canada, you’ll be hard pressed to find a lender who will give you a mortgage without one. Home insurance protects your home from perils that insurance companies are willing to cover. These are also referred to as “insured perils.”

What incentives are there to buy a home in Toronto?

The government offers first-time buyers financing of up to 5% of the price of a home (up to 10% if it’s a new-build). If you decide to use the First-Time Home Buyer Incentive, you’re entering a mortgage with the Government of Canada. You also need to pay the government back when you sell the home or after 25 years — whichever comes first.

How are mortgage rates calculated in Toronto?

Your down payment: The size of your down payment is the primary contributor to the size of your mortgage loan. It also factors significantly into determining your mortgage rate. The size of your down payment is a signal to lenders about how capable you are of paying off your mortgage. When it comes to down payments, the more you can put down, the better.

Your debt service ratios: Ontario lenders look at a number of other factors when calculating your mortgage rates. These are known as debt ratios and can be grouped into two categories:

  • Gross Debt Service Ratio (GDS): To calculate your GDS, lenders determine how much of your paycheque will go towards housing. This includes your mortgage, property taxes, heating costs and 50% of your condo fees (if applicable). The lender then divides this by your gross annual income. If the result is greater than 35%, your lender may doubt your ability to handle your monthly housing costs.
  • Total Debt Service Ratio: Your TDS ratio is everything that comprises your GDS ratio plus any other monthly payments you have to make. These could include things like credit card debt, loan payments and car payments. The total is divided by your income. If the result is less than 42%, your lender will be confident that you earn enough to make all your monthly payments.

How are mortgage rates determined on LowestRates.ca?

LowestRates.ca works with 30 banks and brokers across the country to bring you the best rates from lenders in Toronto. We work with our partners to consolidate their best deals and offers, and then we let them compete for your business.

How much does getting a lower interest rate matter in Toronto?

Getting the best mortgage rates is one great way to save money on your mortgage, but it’s one of many things you can do to increase the overall affordability of your mortgage. Some of these features might include prepayment privileges and portability.

  • Prepayment privileges: Not all banks and brokers offer the same prepayment terms, however, so it’s important to raise it before you sign your contract. Before signing on the dotted line, prepayment privileges are something you should discuss with your lender.
  • Penalties: If, for whatever reason, you need to break your mortgage, you may be required to pay thousands of dollars in penalties. While you may wind up with a better rate if you choose to go with a different lender, it’s important to look at the fine print to ensure that it won’t cost you more than you’ll gain.
  • Portability: One way to avoid these penalties is to negotiate a portable mortgage. This means that if you move, you can transfer your mortgage to a new home and combine it with an additional mortgage loan.

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