What Can You Buy in Etobicoke for Under $1 Million?

Housing affordability in Etobicoke has been a troubling issue for residents for a long time. With rising prices and the recent real estate boom we’ve experienced in the market, more people than ever feel that buying a home is out of reach. Add higher interest rates to the mix, and many potential buyers have given up altogether. 

The idea of buying a house for under $1 million was almost laughable unless you were looking for a tiny, one-bedroom condo. As a result, many people feel stuck renting, even though they would love to become homeowners.

However, if you look at the market today, everything is very different. Many entry-level homes are now available at prices that would have been inconceivable even six months ago. What is going on?

Rising Interest Rates are Making Houses More Affordable

You may hear a lot of talk about higher interest rates driving up the cost of borrowing and making buying a home even more unaffordable. But what if the opposite is true? Interest rates are only one small piece of the puzzle. Could higher interest rates actually make it easier to buy a house? Let’s take a look at what happens in the market when rates go up:

• More homeowners decide to list their homes for sale.
• There is less competition and more options for buyers.
• Housing prices go down.

When the price of a house drops by $150,000, it no longer matters if interest rates increase by one percent. What matters is that your mortgage is that much lower!

Did you know we offer a comprehensive guide just for first-time buyers? Download yours for free right here.

Saving for Your Down Payment is Easier

Being able to afford a down payment is one of the biggest obstacles to buying a home. As prices go down, the barrier for entry into the housing market is lower because the down payment is less, and not just based on the percentage. 

If you’re looking at a house priced at $1 million or more, you need 20% upfront. There is no getting around it. That’s a minimum of $200,000 before the banks even consider approving your mortgage. However, as soon as a house drops in price, the down payment structure is very different and becomes far more accessible.

Under the mortgage guidelines, you need 5% on the first $500,000, which equals $25,000.

Plus, you need 10% on anything over and above $500,000. Here’s how it works out in the real world:

• On a million-dollar home, your down payment is $200,000.
• When that million-dollar home drops to $850,000 you only need $60,000 upfront. (5% of $500,000 = $25,000. 10% of the remaining $350,000 = $35,000, for a grand total of $60,000)

Suddenly, buying a detached home is far more affordable, even in a highly coveted city like Etobicoke.

Trying to budget for your new home? See how much you can afford right here.

A Home Buying Case Study

Real estate transactions and mortgages can be complicated. It isn’t easy to picture how fluctuating prices and interest rates impact housing affordability. To illustrate, let’s examine a case study for a transaction during the peak of the housing market in March 2022. 

Buying in March 

• The house price was $1,125,000, making the down payment $225,000. 
• The total amount borrowed would be $900,000
• Land transfer taxes for a first-time buyer are $29,485.
• The monthly mortgage payment at 1.89% interest is $3,763.

Now let’s look at the numbers for a similar property six months later, after prices had dropped. We’ll again calculate the down payment as 20% for an apples-to-apples comparison. However, remember that it could be far less now that the house price is under $1 million.

Buying in October

• The total amount for the property is now $885,000.
• The down payment is $177,000.
• The total amount of the mortgage becomes $708,000.
• Land transfer taxes for a first-time buyer are now only $19,875.
• The monthly mortgage payment at $3,994.

What do you notice first about these numbers? Far too many people only look at the monthly payment, which is slightly more when interest rates are high. However, there are three valuable takeaways from these examples.

1. Interest rates fluctuate. They may be high now, but they could drop again, resulting in a lower payment upon your mortgage renewal.
2. The total amount you need to borrow is $192,000 less. To put it into perspective, consider how long it would take to pay off that amount. That’s how much less you are paying over time. It’s a massive savings that makes the impact of higher rates almost inconsequential.
3. Your need $57,600 less upfront, including your down payment and the land transfer taxes. That’s factoring in a 20% down payment, but you could pay less if you wanted to.

When you look at the whole picture, not just the interest rates, you can see how much more affordable buying your first home has become. 

Looking for more details on what it’s like to buy a house in Etobicoke? Find out what you need to know in some of our previous posts:

• Don’t Make These Mistakes When Buying a Home in Etobicoke
• Why Working With an Etobicoke Realtor® is More Critical Than Ever
• Are Prices in Etobicoke Going Down?

An Investment in Your Future

Most financial advisors will tell you you’re throwing money away by paying monthly rent. You’re not building equity, and you have no safety net for when rent prices start to increase. 

Buying a house now helps you enjoy a more financially secure future. Every time you make a mortgage payment, your equity grows. And more importantly, your equity and wealth grow every time your home rises in value.

Over the past 25 years, the average annual appreciation in Toronto has ranged from 8% to 23%. Even when houses drop in price, they don’t stay down for long.

A home you buy for less than $1 million today will soon be worth much more.

Entry Level Homes by Neighbourhood: Now Available for Under $1 Million

At the peak of the housing boom, there were essentially no detached or semi-detached homes that sold for under $1 million. 

In fact, the average price for a detached house reached nearly $2 million at one point. What a difference a few months can make! Here is a brief snapshot of some great entry-level properties available from September 2022 onwards.

• A two-bedroom semi-detached sold for $775,000 in the Queensway. Until now, the least expensive non-condo option we encountered was listed at $1,120,000.
• In the Mimico/New Toronto area, the least expensive option in February/March was $1,101,001 Fast forward to today, and a similar property sells for $715,000. 
• A bungalow in Long Branch recently sold for just $755,000. During the peak, you could not find anything less than $1,062,000.
• In the winter, a semi-detached property in Alderwood started around $1.2 million. Now, a three-bedroom semi-detached home recently sold for $885,000.

If you’ve ever wanted to stop renting and start building equity with a home of your own, you now have a window of opportunity. It is a very exciting time in the market, especially for first-time home buyers!

Do you want to see what’s available in the Etobicoke area today? We often have access to off-market listings at far more affordable prices. To find out more, reach out to us by email or call 416-450-5900.