HomebuyingDoes getting a private mortgage ever make sense?
This article has been updated from a previous version.
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Toronto is one of Canada’s most expensive housing markets. If you're trying to buy a home in the big city, you’re probably on the lookout for the lowest mortgage interest rate in Toronto you can find.
We can help with that. LowestRates.ca brings you the best mortgage rates from 50+ Canadian banks and brokers.
We shop the mortgage market for you by comparing mortgage rates not just in Toronto or Ontario, but across Canada.
All you have to do is fill out the form and you’ll be on your way to securing the cheapest Toronto mortgage rates. It's totally free, and you're not obligated to do anything.
Keep scrolling to learn everything you need to know about mortgage rates for a house in Toronto. And if you're eyeing a condo, like so many Torontonians, we didn't leave you out: the information below applies to condos, too.
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Conventional vs. high-ratio mortgages: which is cheaper?
Depending on how much of a down payment you have, there are two main types of mortgages you can apply for: a conventional mortgage or a high-ratio mortgage.
A conventional mortgage means the homebuyer has a down payment of at least 20% of the property’s purchase price. For example: If a home costs $850,000, the down payment would need to be at least $170,000 for a conventional mortgage. With this type of mortgage, the homebuyer doesn’t have to purchase mortgage insurance from the Canada Mortgage and Housing Corporation (CMHC).
A high-ratio mortgage, on the other hand, is where buyers put down less than 20% of the purchase price as a down payment. In this scenario, you’re required to purchase mortgage insurance from the CMHC. This type of insurance is to protect lenders if you stop making your mortgage payments and default on your loan.
Now to answer the question of which mortgage type is cheaper: it depends! The interest rates on high-ratio mortgages tend to be lower than the rates offered to buyers who can make a larger down payment. Why? Because they're insured by the CMHC, which lowers the amount of risk the lender takes on. No matter what, if you stop making mortgage payments, the lender will get their money back thanks to insurance.
However, the larger your down payment, the smaller your mortgage loan will be. This means your payments will also be smaller compared to someone with a high-ratio mortgage.
One thing's for sure, no matter which type of mortgage you go for, you can almost certainly find a better mortgage rate by comparing multiple lenders.
Conventional 5-year fixed mortgage rates vs. high ratio 5-year fixed mortgage rates in Ontario
| Date | Average Conventional Rate | Average High Ratio Rate |
|---|---|---|
| 09/21 | 2.02% | 1.75% |
| 10/21 | 2.12% | 1.87% |
| 11/21 | 2.41% | 2.16% |
| 12/21 | 2.48% | 2.21% |
| 01/22 | 2.56% | 2.31% |
| 02/22 | 2.77% | 2.49% |
| 03/22 | 3.07% | 2.77% |
| 04/22 | 3.61% | 3.33% |
| 05/22 | 4.04% | 3.69% |
| 06/22 | 4.36% | 3.98% |
| 07/22 | 4.85% | 4.46% |
| 08/22 | 4.79% | 4.36% |
Last Updated: September 1, 2022
Fixed rate vs. variable rate mortgages: which is cheaper?
When looking for the best mortgage rates for homes in Toronto, you want to be aware of the options that best suit your needs. When it comes to mortgage rates, there are two types to choose from: fixed or variable.
A fixed rate doesn’t change for the entire length of your mortgage term. This means your rate is locked in and stays consistent for a specified number of years, regardless of changes in the market.
On the other hand, variable mortgage rates in Toronto will fluctuate based on changes in the market, including changes to the Bank of Canada’s overnight rate. The Bank of Canada’s overnight rate influences the interest rate lenders set for certain loans, including variable rate mortgages.
Fixed mortgage rates in Toronto are usually higher, but can be attractive to buyers who want consistency throughout their term.
5-year fixed vs. 5-year variable mortgage rates in Ontario
| Month | Fixed | Variable |
|---|---|---|
| 09/21 | 1.92% | 1.27% |
| 10/21 | 2.05% | 1.24% |
| 11/21 | 2.32% | 1.19% |
| 12/21 | 2.38% | 1.18% |
| 01/22 | 2.47% | 1.23% |
| 02/22 | 2.66% | 1.26% |
| 03/22 | 3.00% | 1.53% |
| 04/22 | 3.51% | 1.86% |
| 05/22 | 3.90% | 2.26% |
| 06/22 | 4.24% | 2.71% |
| 07/22 | 4.72% | 3.20% |
| 08/22 | 4.60% | 3.79% |
Last Updated: September 1, 2022
Factors that affect your Toronto mortgage rate
Before you start searching for your dream home or condo, it’s a good idea to sit down and take a good look at your financial situation. There are a number of factors that mortgage companies in Toronto consider before approving your application. Understanding what lenders look at to calculate your Toronto mortgage rate can help you secure the lowest possible interest rate.
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Typical mortgage amount in Toronto
A “typical” mortgage size for Toronto depends on the amount of your down payment and the price of the home. Unless you’ve saved up a substantial down payment, the size of a mortgage in Toronto will likely be much higher compared to other cities.
The benchmark price for a single-family home in the Greater Toronto Area (GTA) is $1,074,600 as of January 2021, according to data from the Canadian Real Estate Association (CREA). At that price, a 20% down payment would be $214,920. That means the remaining mortgage balance would be $859,680.
This mortgage cost also doesn’t include the total paid in interest over time because that would depend on the buyer’s mortgage rate, type and amortization period. If your down payment is less than 20% of the home’s price and you need to buy mortgage insurance, that would bump up the cost.
Toronto’s housing market and home prices
The housing market in Toronto has been booming for years, and is usually neck-in-neck with Vancouver for Canada’s most expensive housing market. That extends to the (GTA), which has roughly 6.4 million residents and includes the Durham, Halton, Peel and York municipalities.
During 2020, benchmark prices for single-family detached homes steadily climbed toward the million-dollar mark. Between January 2020 and January 2021, the benchmark price for a single-family home in the GTA increased by 16% from $921,600 to $1,074,600, according to CREA data. Within the city of Toronto, the average price for a detached home is $1,369,848 as of January 2021, according to the Toronto Real Estate Board (TREB).
Other forms of housing, such as townhomes and condos are also seeing changes. According to TREB, the average price for a condo in Toronto reached $679,182, in January 2021, up 15% year-over-year. Meanwhile, the benchmark price of a townhouse was $782,274, down 1.9% from the same time last year.
Toronto closing costs and land transfer tax
As with many things, extra little fees and costs add up. If you’re buying a home in Toronto, you need to have money for more than just the down payment and mortgage fees. Below is a list of costs to budget for and plan for in advance. In preparing for closing day, experts recommend stashing aside 1.5% to 4% of the purchase price for these additional costs:
- Title insurance
- Mortgage default insurance (if applicable)
- Property valuation fees
- Home inspection fees
- Legal fees
- Home insurance
- Provincial sales tax (PST) on CMHC insurance (in Ontario, it’s 8%)
- Good and services tax (GST) or harmonized sales tax (HST) if you’re buying a brand new home or condo
Toronto is unique in that it charges home buyers a municipal land transfer tax on top of the Ontario provincial land transfer tax. Ontario’s land transfer tax is based on the value of your property. Here’s how the provincial land transfer tax is calculated:
| Purchase Price | Tax Rate |
|---|---|
| 0–$55,000 | 0.5% |
| $55,000–$250,000 | 1% |
| $250,000–$400,000 | 1.5% |
| $400,000–$2 million | 2% |
| $2 million + | 2.5% |
The City of Toronto’s land transfer tax is calculated the same way as the provincial one. So if you’re buying a home within Toronto city limits, you’re going to pay a double land transfer tax.
Your questions about Toronto mortgages, answered.
What’s the difference between a mortgage term and an amortization period?
For first-time buyers, the terms and definitions around buying your house or condo can be a little confusing. One of the most misunderstood concepts is the mortgage term vs. the amortization period.
Mortgage term: The term is the amount of time certain conditions are locked in, such as your interest rate. Terms usually run from six months to 10 years, but five years is the most common mortgage term in Canada. By the end of the term, the mortgage must either be fully paid off or you must get a new term, with new conditions.
Amortization period: Amortization is the total amount of time it takes to pay off your mortgage in full. In Canada, an amortization period can be up to 30 years. If your down payment is less than 20%, the maximum amortization period allowed by the CMHC is 25 years. A shorter amortization period means your monthly payments will be higher, but you’ll pay less interest. A longer amortization period means your payments will be lower, but you’ll pay more toward interest charges over the life of your mortgage.
What’s the difference between an open mortgage vs. a closed mortgage?
When securing a mortgage, one of the many decisions you’ll have to make is whether you want an open mortgage or a closed one. How do they differ?
Closed mortgage: A cut-and-dry, non-flexible contract in which you’re not allowed to make additional payments or increase the amount of your mortgage payments. You also won’t be able to negotiate any terms or pay the entire mortgage off before the end date of the mortgage term.
Open mortgage: This type of mortgage has wiggle room and flexibility, and allows you to make additional payments on your mortgage if you want to. The downside? Open mortgages typically have higher interest rates.
How much does it cost to live in Toronto?
Along with Vancouver, Toronto is one of the most expensive cities in Canada. 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.
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.
Your questions about LowestRates.ca, answered.
How are mortgage rates determined on LowestRates.ca?
LowestRates.ca works with 50+ banks and brokers across the country to bring you the best rates for homes in Toronto. We work with our partners to obtain their best deals and offers, and then we let them compete for your business. All you have to do is answer a few questions, and in minutes you’ll be provided with today’s mortgage rates for Toronto. There’s no obligation, but you can choose to speak with our broker partner to secure your best rate and see if you're eligible for more savings.
Is it safe to get a mortgage online?
Yes, it’s safe — you no longer need to visit a bank branch or mortgage broker’s office in person to apply for a mortgage. It’s becoming increasingly common for Canadians to apply for mortgages online. LowestRates.ca only works with reputable, trustworthy financial institutions. Your credit score won’t be affected and your information is secure. We don’t share your information with anyone unless you want to connect with a mortgage broker. We take care of the heavy lifting by comparing the market for you and can connect you with the best mortgage lenders not only in Toronto, but across the country.
How do I know I’m getting the lowest rate?
We have a strong selection of lenders on LowestRates.ca, including the big banks and many independent providers, and we’re adding more lenders all the time. This ensures we’re always delivering you a competitive rate. Even if you’re not ready to commit to anything, you can use our site as a starting point for research (it’s totally free, and you’re under no obligation).
The better informed you are, the more likely you'll negotiate a better deal for yourself. And, really, that’s what we care about the most.
Jessica Vomiero
About the Author
Jessica is the former Associate Editor for LowestRates.ca. Before joining the team, Jessica worked as a National Online Journalist with Globalnews.ca and previously spearheaded the launch of the Business Section at one of Canada's largest technology websites, MobileSyrup.
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This article has been updated from a previous version.