This piece was originally published on January 2, 2017, and was updated on October 24, 2022.
As Toronto housing prices continue to climb, so do average mortgage payments. According to the Canadian Real Estate Association (CREA), average home prices in Toronto have increased by 4.3% year-over-year, with the current average home price in the city sitting at $1,110,700 as of September 2022.
If you’re wondering whether or not you can afford a home in this market, consider the monthly mortgage payment in comparison to your current income and expenses. Toronto has an average home price that's over $400,000 more than the national average, which, along with high mortgage rates, makes for a hefty monthly payment.
To calculate a mortgage payment, you’ll need the home price, down payment amount, mortgage rate, amortization period and payment frequency.
Using the average home price in Toronto, we can calculate the average mortgage payment as follows:
Since the average price of a home in Toronto is above $500,000, the minimum down payment required can be calculated with the following formula:
- If the home price is above $500,000 the minimum down payment is 10% of the portion of the home’s price above $500,000 plus 5% of $500,000 (which is $25,000). The formula is as follows: minimum down payment = (house price-$500,000) + $25,000
- If the home price is $1,000,000 or more the minimum down payment is 20% of the home price. The formula is as follows: minimum down payment = house price * 20%
Given the average home price of $1,110,700, the minimum down payment required is $222,140. The calculation is as follows: $1,110,700 *20% = $222,140.
The mortgage rate determines how much interest you will pay on your mortgage; it can be a fixed rate or a variable rate and can span many years.
With a fixed-rate mortgage, your mortgage payments will always be the same amount as your rate stays constant throughout the term. However, with a variable mortgage rate, your payments will vary, as your rate will fluctuate with the prime rate. This is because variable rates are dependent on the prime rate—when the prime rate increases or decreases, so will your variable rate, which will then affect how large your mortgage payment is.
Getting the best mortgage rate is the easiest way to reduce your mortgage payment. The most popular mortgage rates are 5-year fixed and 5-year variable rates. To calculate the average mortgage payment in Toronto, we’ll use the best 5-year fixed rate currently on the market of 5.14%.
The amortization period is the length of time you’ll take to pay off your mortgage. This time period is different from your mortgage term, which is how long your mortgage rate is locked in for. Therefore, your amortization period is typically a lot longer than your mortgage term, requiring you to renew your mortgage multiple terms during the amortization period. Amortization periods can be of any length of time, with the most popular term being 25 years. This is the period we’ll use for our calculation. You should check out our amortization calculator if you want to get a sense of what your monthly mortgage payments would be under different amortization length scenarios.
The payment frequency is how often you would like to make your mortgage payment. The typical frequencies are monthly, biweekly and accelerated biweekly. To calculate the average mortgage payment in Toronto, we’ll use a monthly payment.
Using the mortgage payment calculator, the average monthly mortgage payment for a $1,110,700 home in Toronto (if you’ve made the minimum down payment, and selected a 25-year amortization period and a 5-year fixed mortgage rate) is $5,239. However, if you decide to increase your down payment to 30% of the home price, the monthly mortgage payment will decrease to $4,584.
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