How much does it cost to own a home in Toronto?

Purchasing a property in Toronto is not for the faint of heart. The average home price in the city has hovered near or above the million-dollar mark for the last three years, most recently coming to $1,156,167 in April. Coupled with elevated mortgage rates, it takes considerable financial resources – or perhaps a generous gift – to afford a home in Canada’s largest city.

Most home buyers are laser-focused on home price and mortgage rates when determining their affordability – but in doing so, overlook considerable monthly outlays that also impact the overall cost of homeownership. A mortgage is just a piece of the puzzle; while homeowners know exactly what their monthly mortgage payment will be for their term, other surprise costs can add up fast.

Crunching the hidden costs of home ownership

In order to truly illustrate the cost of owning a home in Toronto, Ratehub.ca crunched the numbers on 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.

Please note the information in this chart is for illustration purposes only. Monthly costs will vary from home to home. *Average home price for Greater Toronto as of April 2024, CREA / ** The best 5-year fixed uninsured rate as of April 15, 2024

“As the average home price remains firmly above the $1-million mark in Toronto, affordability remains top of mind for would-be home buyers,” says Penelope Graham, Director of Mortgage Content at Ratehub.ca. “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.”

Homeowners are wise to prepare for the unexpected

Graham adds that many first-time home buyers – particularly those purchasing a detached house, and who are responsible for all upkeep – can be surprised by how quickly unexpected repairs or improvements can exceed a budget.

“A crucial cost that’s often left out of the home affordability equation is the need to maintain an emergency maintenance fund,” she says. “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.” 

Home insurance is another cost that home buyers may not initially consider, but takes up a significant chunk of the budget. Coverage is also becoming increasingly expensive, says Matt Hands, VP of Insurance at Ratehub.ca, 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,” he says. “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.”

This is a particular risk in major metropolitan cities like Toronto, he adds, due to its dense population, older homes, and overloaded sewer systems. He says homeowners should be sure their current home insurance policies take these factors into account, as they have already contributed to an increase in claims.

“Comprehensive home insurance, along with flood endorsements like overland water and sewer backup coverage, can help protect you from financial disaster,” says Hands. “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."

The bottom line: Shop the market

While it’s always a great idea to be knowledgeable about your financial product options, comparing the market is especially important in expensive urban centres, where living costs are already high. 

“Given the elevated cost of ownership in Toronto, it’s imperative that homeowners get the best mortgage rate possible, that’s best suited to their needs,” Graham says. “Even the difference of a few basis points can equal thousands of dollars saved over the course of a mortgage, while features such as prepayment privileges allow borrowers to pay off their mortgages sooner without penalty.”

Hands adds that when it comes to selecting your insurance coverage, there’s strength in numbers.

"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. 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."

Also read:

• April home sales fall as Toronto buyers hold out for rate cuts
• It became tougher to buy a home in April, despite lower mortgage rates
• Home insurance tips for severe weather
• How making multiple water claims impacts your home insurance coverage