Your Guide to Buying a House in Ontario with a Mortgage: Tips and Advice

Buying a house in Ontario with a mortgage is a significant financial decision that requires careful consideration.

Home-buying can be a smooth and rewarding experience with the right knowledge and guidance despite any potential stress.

This comprehensive guide provides all the essential information about buying a house in Ontario with a mortgage. 

From understanding the mortgage process, determining your budget, finding the right property, and negotiating with sellers to closing the deal.

The guide covers every step, providing a detailed checklist to ensure nothing is missed. 

Whether you’re a first-time homebuyer or an experienced homeowner, this guide is your go-to resource for making your dream of owning a home in Ontario a reality.

How Much You Need to Buy a House in Ontario

If you want to buy a house in Ontario, you’ll probably need a mortgage unless you pay the entire amount upfront. 

To qualify for a mortgage, you must put down at least 5% of the house price. 

If the house costs between $500,000 and $1 million, you must pay 5% of the first $500,000 and 10% of the remaining amount as a down payment. For houses priced over $1 million, the required down payment is at least 20% of the house price.

As of February 2023, the average price of a detached house in Ontario is around $865,279. 

However, the price can be over a million dollars in cities like Mississauga and Toronto.

If you’re purchasing a house at the average price, the required down payment is $61,527.90. This amount is 5% of the first $500,000 and 10% of the remaining $365,279.

In Toronto, where house prices can exceed a million dollars, the down payment required is 20% of the house’s value, which can be over $200,000. 

You should also consider other costs, such as closing costs, land transfer taxes, and home inspection fees, in addition to the down payment.

Required Steps to Buy a House in Ontario

Initial Affordability Assessment

One of the first steps in buying a house in Ontario is to complete an initial assessment of your income, assets, credit and debts to see if they are sufficient to afford the mortgage you need for the house you want.

This step is also called prequalification for a mortgage. 

Nowadays, you don’t need to schedule an appointment with a mortgage professional to figure out how much house you can afford in Ontario.

Instead, simply input your income, down payment, monthly debt load, and credit score to calculate your home-buying power. 

Based on these results, you can decide if you need more time to save for a larger down payment, increase your income, reduce your debt load, or adjust your expectations for homeownership.

Get Pre-approved for a Mortgage

A pre-approval helps establish how much you can afford to borrow, the interest rate you may qualify for, and the mortgage terms. It is an essential step in the home-buying process which shouldn’t be skipped. 

This process involves providing personal information, employment history, credit score, and financial details such as income, assets, and liabilities. 

You can utilize the approvU platform to obtain pre-approval for a mortgage. 

approvU is the most convenient and simple way to access mortgages from some of Ontario’s leading lenders. To start the process, click “I Want To Get Pre-approved,” You will be guided through the steps to obtain your pre-approval letter. 

You can download your pre-approval letter or conveniently share it directly from your account with your Realtor and other relevant third parties.

Obtaining a mortgage pre-approval can help you demonstrate to sellers that you are a serious buyer with the financial capacity to purchase a home.

Additionally, mortgage pre-approval offers multiple benefits for homebuyers:

• It helps streamline the house-hunting process, allowing you to focus on properties within your price range, saving you time and effort.
• It gives you an edge in a competitive market, as sellers prefer buyers who have already secured financing.
• A pre-approved mortgage can expedite the closing process, as much of the required paperwork has already been completed.

Mortgage pre-approvals are typically valid for a limited period, usually 90-120 days, and are subject to certain conditions. 

Maintaining your financial stability throughout the home-buying process is essential, as any significant changes to your financial situation could affect the terms of your mortgage or even result in the withdrawal of your pre-approval.

Explore Different Neighbourhoods and Locations

Once you know how much you can afford, it’s time to research different neighbourhoods and locations to find the best-fit area. Remember that Ontario has many housing options, and prices vary significantly by location and neighbourhood. 

So, it’s important to research and find a location that meets your needs and fits your budget. When reviewing neighbourhoods, you should consider proximity to schools, public transportation, and amenities. 

Here are a few areas that are considered more affordable in Ontario as of February 2023:

9 Most Affordable Cities to Buy a House in Ontario

• Windsor: Located in southwestern Ontario, Windsor is a mid-sized city with a population of around 240,000. This city is known for its low housing prices and cost of living. As of February, the median house price in Windsor is $565,400, which is lower than the provincial average of $865,279. 
• Sudbury: Sudbury is a mid-sized city in Northern Ontario with a population of around 160,000. It is well known for its mining industry. As of early 2023, the average house price in Sudbury is around $426,404, making it an affordable option for those looking for a more rural setting. 
• Thunder Bay: Situated on the northwestern shore of Lake Superior, Thunder Bay is a mid-sized city with a population of around 110,000. The average house price in Thunder Bay is around $295,000, making it one of the province’s more affordable real estate markets.

• Sarnia: Sarnia is a city located in the southwestern part of Ontario, on the shores of Lake Huron. Sarnia’s housing market is relatively affordable, with a median house price of $503,486, lower than the provincial average. 
• Timmins – Located in northeastern Ontario, Timmins is a mid-sized city with a population of around 43,000. As of early 2023, the average house price in Timmins is around $262,888, making it one of the province’s most affordable real estate markets.

• Sault Ste. Marie – Located at the eastern edge of Lake Superior, Sault Ste. Marie is a moderately sized city with a population of approximately 75,000 residents. With an average house price of around $285,812, Sault Ste. Marie boasts some of the most affordable housing options in the province, making it an attractive real estate market for potential buyers.

• Belleville – Situated in southeastern Ontario, Belleville is a mid-sized city with a population of around 50,000. The average house price in Belleville is around $546,053, making it an affordable option for those looking for a small city with urban amenities.

• Cornwall—Situated in eastern Ontario along the St. Lawrence River, Cornwall is a moderately sized city with approximately 47,000 residents. With an average house price of $436,035, Cornwall remains an affordable option for those looking to reside in Ontario.

• Pembroke—Located in eastern Ontario along the Ottawa River, Pembroke is a small city of approximately 15,000 residents. With an average house price of $404,498, Pembroke stands out as one of the province’s most affordable places for real estate, offering prices below the provincial average.

It’s important to note that these are just general indications, and prices can vary depending on the location, property type, and current market conditions in these affordable cities. 

It’s always a good idea to research the local market and understand what is available and at what price to make an informed decision.

The 7 Most Expensive Places to Buy in Ontario

Here are the seven biggest cities in Ontario and their average house prices:

• Toronto – Toronto is the largest city in Ontario and Canada, with over 2.7 million people. The average house price in Toronto is around $1.1 million, making it one of the province’s most expensive real estate markets. 
• Mississauga—Situated west of Toronto, Mississauga is a substantial urban centre with a population of over 700,000. The city’s real estate market is relatively expensive, with the average house price hovering around $1 million, which is among the province’s more costly markets.

• Brampton – Located in the Greater Toronto Area, Brampton is a large city with over 600,000 people. The average house price in Brampton is around $900,000, making it one of the province’s more expensive real estate markets. 
• Oakville: In the Greater Toronto Area, Oakville is a suburban town known for its affluent neighbourhoods, picturesque lakefront, and expensive real estate. The average house price in Oakville is around $1.3 million. 
• Richmond Hill—A city in the Regional Municipality of York, Richmond Hill has a population of over 200,000 and an average house price of around $1.2 million. 
• Markham – Situated in the Regional Municipality of York, notable for its diverse population and robust economy. As of early 2023, the average house price in Markham is approximately $1.1 million. 
• Vaughan – Located in the Regional Municipality of York, Vaughan has a population of over 330,000. As of early 2023, the average house price in Vaughan is approximately $1 million. 

Hire a Local Real Estate Agent

Another important step in buying a house in Ontario is finding a reputable Real Estate Agent with experience in the local market. It’s best to consult with a local real estate agent if you’re searching for a home. They can provide valuable insights into your preferred neighbourhoods and advise which areas to avoid.

Select Desired Property for Purchase

Once you have a list of potential properties, it’s time to start viewing them. Take your time and carefully consider each property you view, ensuring that it meets your needs and fits within your budget. 

You must look beyond the staged stylish furniture, deep-cleaned walls, and wall decor.

These are quick and easy fixes compared to the property’s mechanical and structural features.

You don’t have to be a professional inspector to decide if a property is worth considering. Here are a few things to consider when shopping for a house in Ontario.

 When viewing a property, there are some factors that you should consider to ensure that you select the best house for you. Here are a few things to keep in mind:

• Location: Consider the property’s location and how it will suit your lifestyle. Look at the proximity to public transportation, schools, parks, shopping centers, and other amenities that are important to you.
• Condition of the property: Take note of the property’s condition, including any repairs or renovations that may be needed. Consider the property’s age and whether it needs major repairs or upgrades.
• Size and layout: Consider the size and layout of the property and think about how it will suit your needs. Take note of the number of bedrooms and bathrooms, as well as the size of the living areas. Consider whether the layout suits your lifestyle and how you use the space.
• Natural light and views: Take note of the natural light and views from the property. Consider whether the property is well-lit and the windows are in good condition. Think about how the views from the property will impact your enjoyment of the space.
• Storage and closet space: Consider the property’s storage and closet space and whether it will suit your needs.
• Potential: Consider the property’s potential and consider whether there is room for improvement or expansion. Consider changing the property to suit your needs, such as adding a room or building a deck.
• Property value: Consider the property’s value and whether it is a good investment. Research the area, comparable properties, and market trends.
• Plans: Consider your plans and how they may impact your viewing property. Consider whether the property will suit your short-term and long-term needs.

Lastly, take your time and don’t rush into a decision. It’s important to view multiple properties and compare them before deciding.

Also, take a second visit to the property to make sure it’s the one for you. 

As you shop for the right property, remember that the buying process can be competitive, so it’s essential to act quickly when you find a property you like.

Submit Your Offer and Negotiate Sale Terms

After you’ve found the property you like, it’s time to make an offer and negotiate the terms of the sale.

Your real estate agent will help you with this process, guiding you to make a competitive offer.

Your offer should include a price, payment form, and any conditions or contingencies. 

Here are a few key things to keep in mind when negotiating:

• Purchase price: The most important aspect of the negotiation is the property’s purchase price. It’s essential to clearly understand the property’s current market value and make a reasonable offer based on that information.
• Closing date: The closing date is when the sale of the property will be finalized. You and the seller should negotiate a working closing date.
• Possession date: This is when you will take possession of the property. Negotiate a possession date that works for you and the seller.
• Conditions of the sale: Your offer can include a few optional conditions, like a home inspection or financing, that must be met before the sale can be completed. It’s essential to carefully consider any conditions in the offer and negotiate with the seller to ensure they are acceptable to both parties.
• Repairs and renovations: If the property requires repairs or renovations, it’s important to negotiate with the seller to determine who will pay for these repairs.
• Chattels and fixtures: It’s also essential to agree on which items, such as appliances and light fixtures, will be included in the property sale.
• Home Warranty: It’s essential to understand whether the home has a warranty and, if not, negotiate for one.
• Legal representation: It is advisable to hire a legal representative, either an attorney or a notary, to review the agreement of purchase and sale and advise you on the terms and conditions of the sale.
• Be flexible: Remember that the negotiation process is a two-way street, and being flexible and open to compromise will help you reach an agreement with the seller.

Arrange for a Mortgage and Finalize Financing

Once your offer has been accepted, you can obtain the necessary mortgage to purchase the house. Ideally, you should have already obtained mortgage pre-approval before committing to the property.
Pre-approval establishes your ability to acquire the required mortgage for the house purchase, allowing you to move forward confidently.

Click the “Ready For Mortgage” button on the pre-approval page to update the qualification flow with the property information. You can also update your credit score and financial details to ensure your current situation is best captured.

The approvU system will reevaluate your eligibility based on the new information to generate a comprehensive list of available mortgage options. It will list the mortgages from the lowest to the highest interest rate, allowing you to compare features and options and select the one that best suits your needs and circumstances.
Select your best three mortgages from the list to proceed to the next stage of the process.

Close the Sale, Take Possession of the Property

The closing day is when the property is officially transferred from the seller to you. It’s the final step before giving you the keys to your dream home.

If not done right, it can be one of the most stressful days of your life because the lender will only release the money if all the i’s are dotted and the t’s are crossed. 

Your lawyer can be proactive and have you two to three days before the closing day to check and sign the documents.

If anything is needed or missing, at least you will have the time to fix or provide the missing documents before the closing day.  You will need these documents:

1. Status and Identification Validation: You will need at least a copy of an authorized photo ID, such as a driver’s license. Note that a Health Card is not a valid ID in Ontario.
2. Review and Sign the Mortgage Agreements: Your lawyer will review the mortgage commitment letter, cost of borrowing agreement, and the borrower declaration documents. Upon review,  and if you are OK with the terms and conditions of the mortgage agreement, the lawyer will have you sign these documents to confirm your acceptance. 
3. Down Payment and Closing Costs Confirmation: Your lawyer must validate that you have the down payment and closing costs required to complete the transaction. Most lawyers will accept a bank draft as the required form of payment. 
4. Property Title Validation: The lawyer must also verify that the Title has no issue that will prohibit your full ownership of the house. Also, any issue that will jeopardize your lender’s lien on the property.
5. Validate your home insurance: You must also sign up for Home Insurance. Several home insurance providers in Canada exist: RBC, Allstate, Manulife, CIBC, and Aviva. Most auto insurance providers also provide Home insurance. Home insurance will cover expenses when something unexpected or accidental happens to your house. The proof of your insurance is one of the items the lawyer will have to validate to close the mortgage. 
6. Lender Approval: All the signed and validated information will be sent to the lender for approval. The lender may still reject or ask for an amendment to the documents provided by the lawyer. If everything is good, the lender clears the mortgage for funding. Your lawyer will proceed to register the Title with the Land Title Registry and transfer the ownership to you. 
7. Funding: The final step is requesting and disbursing the money. The Lawyer will request the money from the lender and transfer it to the seller’s lawyer. You will be handed the keys to the property and know the house’s new owner.