Mortgage rates in Ontario
Ontario is Canada's largest mortgage market. The province is home to the "big five" Canadian banks of BMO, CIBC, RBC, Scotiabank, and TD Canada Trust. Collectively the "big five" banks originate over 80% of mortgage loans in Canada.
Regional credit unions also serve Ontario's mortgage market. Although much smaller in size to the "big five" banks, these credit unions offer competitive interest rates and unique mortgage products that can accommodate a variety of homeownership scenarios.
Ontario is also home to some of the largest mortgage brokerages in Canada. These brokerages can offer their clients very low interest rates, though volume discounts they receive from the mortgage lenders they work with.
Overall, mortgage rates in Ontario are very competitive. A robust ecosystem of banks, credit unions, mortgage brokerages, and mortgage finance companies allows for some of the best mortgage rates and mortgage products in Canada.
What is the difference between a fixed rate and variable rate mortgage in Ontario?
With a fixed rate mortgage, the interest rate you pay on your mortgage loan stays the same throughout your mortgage term. Fixed rate mortgages give certainty in terms of how much your mortgage payments will be every month; there's no need to worry about interest rates increasing.
Variable rate mortgages are a good option if you believe interest rates will remain low or will decrease during your mortgage term. The interest rate on your mortgage will be pegged to the prime lending rate of your mortgage lender, plus or minus a certain percentage. If the prime lending rate of your lender increases, you'll pay more in interest cost. If the prime lending rate decrease, you'll pay less.
Most mortgages in Ontario are fixed-rate loans. In Toronto and Ottawa, 63% and 68% of mortgages, respectively, are fixed rate in nature. Outside the urban centers in Ontario, the percentage of mortgages that are fixed rate rises to 81%.
What's the difference between an open term and closed term mortgage?
An open term mortgage allows you to make prepayments (extra payments) against your mortgage balance without any limitations and penalties. It also allows you to pay off your mortgage entirely at any time during the term.
Closed term mortgages, on the other hand, only allow prepayments up to a specific limit every year. If you exceed these prepayment limits or terminate your mortgage term early, you'll have to pay a penalty charged by your mortgage lender.
Closed terms come in a variety of term lengths ranging from 6 months up to 10 years and more in some cases. They also have lower interest rates than open term mortgages, making closed term mortgages the most common type of mortgage term in Ontario.
Open term mortgages typically come in 6 month and 1 year terms. The limited term lengths, along with higher interest costs, make open mortgages less popular in the province. Open term mortgages usually make sense if you plan on selling your home, or making a large lump sum prepayment on your mortgage, within the next year.
Ontario land transfer tax
In Ontario, when you purchase a home, condo, or townhouse, you are required to pay a land transfer tax. The Ontario land transfer tax is as follows:
- 0.5% on the value of the property up to and including $55,000
- 1% of the value of the property above $55,000 and up to and including $250,000
- 1.5% of the value of the property above $250,000 and up to and including $400,000
- 2% of the value of the property above $400,000 and up to and including $2,000,000
- 2.5% of the value of the property that exceeds $2,000,000 (where the property contains one or two single family residences)
If you're a first-time homebuyer in Ontario, you're eligible for a land transfer tax rebate of $4,000. This is an amount that will get rebated to you by the Ontario government after closing the purchase of your home. Any provincial land transfer tax owing beyond $4,000 would still have to be paid.
If you purchase property in the City of Toronto, there's also an additional municipal land transfer tax that you have to pay. The municipal land transfer tax is:
- 0.5% on the value of the property up to and including $55,000
- 1% of the value of the property over $55,000 and up to and including $250,000
- 1.5% of the value of the property over $250,000 and up to and including $400,000
- 2% of the value of the property over $400,000
The City of Toronto also has a first-time homebuyer rebate of $4,475. Being a first-time homebuyer in Toronto would afford you both the provincial rebate of $4,000 as well as the municipal rebate of $4,475 for a total rebate of up to $8,475.
As an example of how land transfer taxes work in practice, suppose you're purchasing a home in Ontario for $800,000. The provincial land transfer tax would be as follows:
- $275 tax on the first $55,000
- $1,950 tax on the amount between $55,000 and $250,000
- $2,250 tax on the amount between $250,000 and $400,000
- $8,000 tax on the amount between $400,000 to $800,000
Your land transfer tax in Ontario would be $12,475 ($275 + $1,950 + $2,250 + $8,000).
If you qualified as a first-time homebuyer, you would get a land transfer tax rebate of $4,000. After applying the rebate, your provincial land transfer tax balance owing would be just $8,475 ($12,475 - $4,000).
If you had purchased the same home in the City of Toronto, your municipal portion of the land transfer tax would also come out to $12,475. The calculations would be the same as the provincial land transfer tax.
Combining both the provincial and municipal land transfer taxes, your total land transfer tax bill would be $24,950 ($12,475 + $12,475), or $16,950 ($12,475 + $12,475 - $4,000 - $4,475) with a first-time homebuyer rebate.
Ontario housing market
Ontario is Canada's largest housing market. The province is home to almost 40% of Canada's entire population. As with much of the rest of the country, real estate prices in Ontario have steadily been increasing over the last decade.
Outside the urban centers of Toronto and Ottawa, homeownership rates in Ontario are amongst the highest in the country, with over 70% of households owning their primary place of residence.
Toronto housing market
The capital of Ontario, Toronto, has seen some of the fastest rising real estate prices in Canada. Since 2008, real estate prices have risen over 120%. This rapid rise in prices is largely attributed to Toronto's status as Canada's economic capital and most populous city.
Homeownership rates in Toronto are 58%, which is slightly lower than the national average of 63%. The lower homeownership rates are primarily attributed to the high housing costs in Toronto.
The regions just past official city limits are known as the Greater Toronto Area (GTA). The GTA includes the City of Toronto, as well as the regions of Peel, York, Durham, and Halton. Collectively the Greater Toronto Area is home to almost 6 million people or about 15% of Canada's total population.
Ontario mortgage brokers
Mortgage brokers work with many different lenders, such as banks, credit unions, and monoline lenders. Each lender has different interest rates and conditions on the mortgages they offer. A licensed mortgage broker can help you make sense of the various options available and help you find a mortgage solution that fits your financial needs.
In Ontario, mortgage brokers must be licensed by the Financial Services Commission of Ontario (FSCO). The FSCO regulates mortgage professionals and makes sure they adhere to specific standards of conduct as well as make sure they meet specific educational requirements to obtain their licenses.
When choosing a mortgage broker, or brokerage, to work with, make sure they are fully licensed by the FSCO. Contact a few mortgage brokers and schedule a call or meeting with them to get a feel for their level of knowledge and transparency as a broker, as well as if you'd be comfortable working with them.
With 14 million residents, Ontario is Canada's largest province by population. It is also the 4th largest region, by landmass, out of all the country's provinces and territories.
Ontario is Canada's manufacturing center. Over half of all manufacturing capacity in Canada is based in Ontario. Manufacturing of automobiles, petrochemical products, and industrial equipment make up the largest portion of the province's manufacturing output.
Natural resource based industries play an essential role in Ontario's northern regions. Notably, the mining and forestry industries employ thousands of Ontarians in the more sparsely populated northern portion of the province.
The province's largest city, Toronto, is Canada's hub for the finance industry. All five of the country's biggest banks are headquartered in the city. Toronto is also home to a growing high tech industry with large technology and IT companies operating in the city and the surrounding regions of southern Ontario.
Canada's capital city, Ottawa, is also located in Ontario. Government sector jobs, as well as technology sector jobs, make up the primary source of employment for residents in that region. The Ottawa area also has the highest incomes per capita out of all the major cities in Canada.