Home Buying Guide in Canada for a $500,000 Condo

1. Overview

Purchasing a $500,000 condo in Canada involves several financial and administrative steps. This guide outlines the process, including mortgage insurance, closing costs, and affordability calculations such as Gross Debt Service (GDS) and Total Debt Service (TDS) ratios.

2. Financial Preparation

Determine Affordability

• Purchase Price: $500,000

• Minimum Down Payment:

  • 5% of $500,000 = $25,000

• Mortgage Before Insurance:

  • $500,000 − $25,000 = $475,000

CMHC Mortgage Insurance

• Required for down payments under 20%.

• Premium Rate: 4.00% for a 5% down payment.

• CMHC Premium: 4.00% × $475,000 = $19,000

• Total Mortgage Including Premium: $475,000 + $19,000 = $494,000

Mortgage Details

• Interest Rate (APR): 3.45%

• Amortization Period: 25 years

• Monthly Mortgage Payment: ≈ $2,460

• Total Interest Over 25 Years: ≈ $243,000

• Total Paid Over 25 Years: ≈ $737,000

Estimated Monthly Costs

Expense	Estimated Monthly Cost (CAD)
Mortgage Payment	$2,460
Condo Fees	$500
Property Taxes (Annual $4,000 ÷ 12)	$333
Home Insurance	$50
Utilities (Hydro, Water, Internet)	$200
Total Monthly Housing Cost	$3,543

3. GDS and TDS Calculations

Gross Debt Service (GDS) Ratio

GDS measures the percentage of gross monthly income used for housing costs.

Formula:GDS = (Mortgage + Property Taxes + Heating + 50% Condo Fees) ÷ Gross Monthly Income × 100

Example Calculation:

• Mortgage: $2,460

• Property Taxes: $333

• Heating: $100

• 50% Condo Fees: $250

• Total Housing Costs: $3,143

If gross monthly income = $9,000:GDS = ($3,143 ÷ $9,000) × 100 = 34.9%

Guideline: Lenders prefer GDS ≤ 39%.

Total Debt Service (TDS) Ratio

TDS includes all housing costs plus other monthly debt obligations.

Formula:TDS = (Housing Costs + Other Debts) ÷ Gross Monthly Income × 100

Example Calculation:

• Housing Costs: $3,143

• Other Debts (car loan, credit cards, etc.): $400

• Total: $3,543

TDS = ($3,543 ÷ $9,000) × 100 = 39.4%

Guideline: Lenders prefer TDS ≤ 44%.

4. Breakdown of Fees and Insurance Premiums

Fee/Cost	Description	Estimated Amount (CAD)
Down Payment	5% of purchase price	$25,000
CMHC Insurance Premium	4% of $475,000	$19,000
Land Transfer Tax (Ontario Example)	Based on $500,000	$6,475
Legal Fees	Lawyer services for closing	$1,500
Title Insurance	Protects against title defects	$300
Home Inspection	Optional but recommended	$500
Appraisal Fee	Required by lender	$400
Property Tax Adjustment	Prorated at closing	$500–$1,000
Condo Status Certificate	Review of condo financials	$100
Home Insurance (Annual)	Basic condo coverage	$600
Moving Costs	Professional movers or truck rental	$1,000
Total Estimated Upfront Costs (Excluding Down Payment)	—	$9,000–$11,000

5. Mortgage Process

1. Get Pre-Approved:

   
   

   Obtain a mortgage pre-approval to confirm borrowing capacity and lock in a rate.

2. Compare Lenders:

   
   

   Evaluate banks, credit unions, and mortgage brokers for the best terms.

3. Select Mortgage Type:

   • Fixed-rate: Predictable payments.

   • Variable-rate: Payments fluctuate with market rates.

6. Finding the Right Condo

• Research neighborhoods for amenities, transit, and resale potential.

• Review the condo corporation’s financial health and reserve fund.

• Check for upcoming special assessments or major repairs.

7. Making an Offer

• Offer Price: Based on comparable sales.

• Conditions: Financing, inspection, and condo document review.

• Deposit: Typically 5% of purchase price, held in trust.

8. Closing the Deal

• Hire a real estate lawyer to manage title transfer and closing documents.

• Pay closing costs and finalize mortgage paperwork.

• Conduct a final walkthrough before possession.

9. Example Cost Summary

Category	Amount (CAD)
Purchase Price	$500,000
Down Payment (5%)	$25,000
Mortgage Before Insurance	$475,000
CMHC Premium (4%)	$19,000
Total Mortgage	$494,000
Interest Rate (APR)	3.45%
Amortization Period	25 years
Monthly Mortgage Payment	$2,460
Total Interest Paid (Approx.)	$243,000
Land Transfer Tax	$6,475
Legal & Title Fees	$1,800
Inspection & Appraisal	$900
Condo Fees (Monthly)	$500
Property Taxes (Annual)	$4,000
Home Insurance (Annual)	$600

10. Summary

Buying a $500,000 condo in Canada with a 5% down payment involves a total mortgage of approximately $494,000 after CMHC insurance. At a 3.45% APR over 25 years, monthly payments are about $2,460. Including taxes, condo fees, and utilities, total monthly housing costs reach around $3,500. Maintaining GDS below 39% and TDS below 44% ensures financial stability and mortgage approval readiness.