Here's how much it really costs to own home in Toronto
Buying a home in Toronto can be daunting, especially considering that the average home price in the city has hovered around the million-dollar mark for the last three years, and even recently peaked at $1,156,167 in April.
While most prospective buyers are fixated on home prices and mortgage rates, a new report by Ratehub.ca reveals the often-overlooked and “surprise” monthly payments that also impact the overall cost of homeownership in Toronto.
“As the average home price remains firmly above the $1-million mark in Toronto, affordability remains top of mind for would-be home buyers,” said Penelope Graham, Director of Mortgage Content.
“However, the ability to carry a mortgage depends on factors beyond just the home’s purchase price and mortgage interest rate. It’s important for homeowners to be aware of how other costs, such as property tax, insurance, and utilities will also impact their monthly bottom line.”
To determine just how much it costs to own a home in the city, the mortgage broker compiled the numbers of the most common bills paid each month as a homeowner.
The calculations assume a borrower has purchased a home priced at $1,128,100, and has taken out a $902,480 mortgage at a rate of 5.14%, amortized over 25 years.
The report found that monthly costs associated with owning a home in Toronto could reach a total of $8,532 a month, assuming a mortgage payment of $5,321, a property tax bill of $672, home insurance bill of $179, utilities at $300, internet/TV/streaming bills at $180, and a home emergency fund of $1,880.
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“A crucial cost that’s often left out of the home affordability equation is the need to maintain an emergency maintenance fund,” Graham explained.
“Unexpected issues can and do occur, especially in Toronto’s older housing stock. It’s recommended that homeowners set aside 2% of their home’s total value on an annual basis to account for any surprise repair needs.”
Another hefty bill some home buyers may not initially consider is home insurance, which may take up a significant chunk of their budget, especially as weather-related damage and climate events become more frequent.
“Canadians are continuing to face increasing insurance premiums, which is adding another challenging layer to home affordability across the country,” said Matt Hands, VP of Insurance at Ratehub.ca.
“This surge is driven by higher claims costs and the increasing frequency of climate change-related incidents. The impact of climate change and severe weather has significantly strained the insurance industry, compelling providers to raise premiums to mitigate their losses.”
Major cities like Toronto are at particular risk, considering the city’s dense population, older homes, and overloaded sewer system.
“Comprehensive home insurance, along with flood endorsements like overland water and sewer backup coverage, can help protect you from financial disaster,” Hands explained.
“Homeowners should also regularly review their policy as claim costs can fluctuate — while most policies include guaranteed replacement value for a full rebuild, your limits for flood-related damages may no longer be sufficient.”
Overall, the report recommends that homeowners try to get the mortgage rate possible, with the difference of a few basis points equalling thousands of dollars saved over the course of a mortgage.
“No two insurance companies will rate you the same — to ensure you get the best price for your situation, it’s always recommended to compare quotes from multiple insurers,” Graham said.
“Additionally, you can save on insurance by bundling policies, seeking out affiliate and loyalty discounts, maintaining a clean record, and having a good credit score. But most importantly, always shop around for the best rates.”
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