Upsizing to a larger home is an exciting chapter for any growing family, but it comes with significant financial decisions. If you’re thinking about moving to a more spacious home, it’s important to fully understand the costs involved, especially in a city like Toronto – where taxes, fees, and market demands add unique factors to the equation.
This guide expands on everything you need to know about upsizing, from specific details about land transfer taxes and property taxes in Toronto to mortgage options, affordability assessments, and avoiding financial pitfalls.
Assessing Your Current Home’s Value
Understanding Your Home’s Market Value
Before you can plan ahead, you need to know what your current home is worth. Market value is influenced by factors like location, local market trends, the size of your home, and its overall condition.
Get a Professional Home Appraisal
Home appraisers can offer an unbiased estimation of your home’s value, factoring in nearby sales, upgrades, and the current market state in Toronto. A professional appraisal usually costs around $300–$500 but provides crucial information for pricing your home competitively.
Boost Your Home’s Value
Before listing, consider these strategies to maximize your sale price:
- Declutter and Deep Clean: A tidy and clean home leaves a lasting impression.
- Repairs and Upgrades: Focus on high-ROI projects like repainting walls or updating the kitchen.
- Home Staging: Professionally staged homes often sell faster and for more money. Expect costs to range from $500 to over $5,000, depending on the scope.
Costs Associated with Selling Your Current Home
Upsizing starts with selling your smaller home, but this comes with some noteworthy costs:
Real Estate Agent Commissions
Real estate agents in Toronto typically charge 5-6% of your home’s sale price. For example, if your home sells for $1,000,000, you could be paying $50,000–$60,000 in commission fees. While this might seem steep, a skilled real estate agent ensures maximum value and a seamless process.
Home Staging and Repairs
Expect staging to cost a few hundred dollars for lighter work or several thousand for a full property makeover. Combine this with potential repair expenses for things like fixing leaks or addressing cosmetic issues before your sale.
Legal Fees and Closing Costs
Hiring a real estate lawyer is non-negotiable. Legal fees and closing costs typically range from 1-3% of your home’s sale price. They’ll handle contracts, title searches, and any legal complications.
Moving Expenses
Don’t forget the cost of moving! Local moves within Toronto can be anywhere from $500 to $2,500, while longer distances or additional services like packing can add up to thousands more.
Toronto-Specific Costs of Selling and Buying
Moving to a larger home in Toronto requires preparation, especially when understanding the local real estate costs.
Land Transfer Taxes
If you’re buying property in Toronto, land transfer tax (LTT) is something you cannot avoid. Buyers here pay both a municipal and provincial land transfer tax. The combined rate depends on your property’s value. Here’s a breakdown of the rates you’ll encounter for each portion of the tax:
Ontario Land Transfer Tax:
- 0.5% on the first $55,000 of the purchase price
- 1.0% on $55,001 to $250,000
- 1.5% on $250,001 to $400,000
- 2.0% on $400,001 to $2,000,000
- 2.5% on amounts above $2,000,000
Toronto’s Municipal Land Transfer Tax (MLTT):
- This follows the same rate structure as Ontario’s LTT, effectively doubling the amount you pay.
Example Calculation:
On a $1.2 million property, here’s how much you’d pay in total land transfer taxes in Toronto:
- Provincial LTT = $20,475
- Municipal LTT = $20,475
- Total = $40,950
Buyers purchasing their first home may qualify for a rebate of up to $4,000 on the Ontario portion and $4,475 on the Toronto portion, which can significantly reduce the tax burden.
Property Taxes in Toronto
Toronto’s property taxes are relatively low compared to other cities in Ontario. The annual amount depends on your home’s assessed value (determined by the Municipal Property Assessment Corporation, or MPAC) and the city’s tax rate.
- As of 2023, Toronto’s residential property tax rate is 0.662708%.
Example Calculation:
If your new home is assessed at $1.5 million, your annual property tax would be calculated as follows:
- Assessed Value x Tax Rate = $1,500,000 x 0.00662708
- Annual Property Tax = $9,940.62
Be aware that municipalities may also charge additional levies, such as education taxes or other local improvements. Always verify these costs for your specific location.
Deep Dive into Mortgage Down Payment Rules
Buying a larger home means a higher purchase price, so the down payment becomes a critical component of your financial planning. Canada has specific rules about how much buyers need to put down upfront.
Minimum Down Payment Rules in Canada
- Homes up to $500,000: You need at least 5% of the purchase price.
- Homes between $500,001 and $999,999: The first $500,000 requires 5%, and any amount over $500,000 needs 10%.
- Homes over $1 million: The minimum down payment is 20% of the entire purchase price.
For instance, if you’re buying a $1.2 million home in Toronto, your minimum down payment would be:
- 20% of $1,200,000 = $240,000.
If you put less than 20% down on homes under $1 million, you’ll need to purchase mortgage loan insurance through providers like the Canada Mortgage and Housing Corporation (CMHC).
Why Aim for a Larger Down Payment?
The more you put down, the less you’ll need to borrow – and that can save you thousands in interest over time. A larger down payment also lowers your monthly payments and avoids mortgage insurance premiums entirely.
Exploring Mortgage Options
Bridge Loans
What They Are: A short-term loan that helps you cover the financial gap if you buy a home before selling your current house.
Pros:
- Lets you secure your dream home before someone else does.
- Provides financial breathing room during transitions.
Cons:
- Higher interest rates compared to traditional mortgages.
- Possible fees, such as administration costs.
Home Equity Loans
What They Are: These loans allow you to borrow against the equity (value minus mortgage debt) in your current home to access funds for your next down payment.
Pros:
- Lower interest rates than unsecured loans.
- Flexible use of funds for many needs, like renovations or bridging costs.
Cons:
- Reduces the equity available in your existing property.
- Risks foreclosure if payments aren’t met.
Mortgage Refinancing
What It Is: Refinancing involves replacing your existing mortgage with a new one – either to access additional funds or secure a lower rate.
Pros:
- Reduces monthly payments or extends your mortgage terms.
- Unlocks greater financial flexibility.
Cons:
- Prepayment penalties may apply if breaking your original mortgage.
- New appraisal or qualification requirements could increase costs.
Determining Affordability
Knowing how much home you can afford is key. Here’s how to clarify your budget and avoid overextending yourself.
1. Calculate Your Debt-to-Income Ratio
Lenders usually recommend that your housing costs (mortgage, utilities, taxes, etc.) don’t exceed 35% of your income, and your total debt load stays under 42%. Understanding these limits helps you control your budget.
2. Use Mortgage Calculators
Online mortgage affordability calculators are a quick way to estimate monthly payments and determine what price range fits your financial reality.
3. Get Pre-Approved
Mortgage pre-approval not only provides a clear spending limit but also strengthens your bargaining position when making offers.
4. Build a Safety Net
Always leave room in your monthly budget for unexpected costs like repairs, fluctuating interest rates, or family emergencies.
Avoiding Financial Pitfalls
Upsizing involves careful decision-making. Here’s how to avoid costly mistakes:
- Don’t Skip Inspections: A $500 inspection can save you thousands in unexpected repairs.
- Avoid Over-Leveraging: Don’t stretch your budget so thin that you struggle to cover everyday expenses after moving.
- Plan for Post-Move Costs: Keep savings ready for new furniture, renovations, or higher utility bills in your larger home.
- Get Professional Advice: Consult with a real estate lawyer, financial advisor, or a trusted mortgage broker before making major decisions.
FAQ Section on Upsizing Costs in Toronto
1. What is the minimum down payment required for a home in Toronto?
For homes under $500,000, it’s 5%. Between $500,001 and $999,999, it’s 5% on the first $500,000 and 10% on the rest. Homes $1 million or more require 20%. For example, a $1.2 million home needs a $240,000 down payment.
2. How are land transfer taxes calculated in Toronto?
Toronto buyers pay both provincial and municipal taxes. Rates start at 0.5% for the first $55,000 and increase to 2.5% on amounts over $2 million. On a $1.2 million home, you’d pay $40,950 in total.
3. Are there rebates available for first-time homebuyers?
Yes, first-time buyers can get rebates up to $4,000 on Ontario taxes and $4,475 on Toronto taxes, for a total savings of up to $8,475.
4. What are the ongoing costs of owning a larger home?
You’ll face higher property taxes (based on Toronto’s rate of 0.662708%), larger utility bills, increased insurance premiums, and more maintenance expenses.
5. How do I know if I can afford to upsize?
Calculate your debt-to-income ratio, use mortgage calculators, and get pre-approved for a loan. Make sure to budget for extra costs like taxes and utilities, and keep savings for emergencies.
6. What are the risks of using a bridge loan?
Bridge loans have higher interest rates and fees. There’s also pressure to sell your current home quickly to repay the loan, which increases risk.
7. Can I use my home equity to fund my next home purchase?
Yes, home equity loans provide funds at lower interest rates, but they reduce your equity. Missed payments could put your home at risk.
8. How can I avoid financial pitfalls when upsizing?
Stick to a budget, plan for extra costs, keep a savings cushion, and seek advice from financial or real estate professionals to make informed decisions.
Making the Move with Confidence
Upsizing to a bigger home in Toronto is more than just switching addresses – it’s about giving your family the space to grow and thrive. While the financial steps can feel overwhelming, understanding specifics like Toronto’s taxes, mortgage options, and budgeting strategies can make the process much more manageable.
When you’re ready to start the next chapter, our team at The Halyard Group is here to help families like yours upsize with ease. From selling your current home to finding your perfect fit, we’re dedicated to simplifying every step so you can focus on what matters most.
Contact us today to start your upsizing journey – your dream home is just a call away.
