The signature guide
What makes a Toronto mortgage different
Most mortgage advice you will read online is written for a $500,000 purchase in a market with one kind of housing. Very little of it survives contact with the Greater Toronto Area, where the average sale price is close to a million dollars, the condo and freehold markets have separated almost completely, and a single price threshold decides whether a purchase can be insured at all.
This is the checklist I actually run on GTA files. Eight issues come up again and again; most never appear in a national lender's marketing and none of them show up on a rate comparison table. If you understand these before you write an offer, you will make better decisions than the rate itself will ever give you.
The one number to establish first
Whether your purchase is above or below $1.5 million. Below it, the minimum down payment is 5% of the first $500,000 plus 10% of the rest — $75,000 on a million-dollar home. At $1.5M and above there is no default insurance: 20% down, so $300,000, and a narrower set of lenders. That single threshold reshapes what you can realistically shop for, so work it out before you start looking rather than after.
What to have ready before you apply
- Two years of T4s and notices of assessment — plus two years of full T1 generals and business financials if you are self-employed
- Recent pay stubs and a letter of employment confirming role, salary and start date
- Ninety days of history on the account holding your down payment, showing where it came from
- A gift letter if any of the down payment is gifted, plus proof of the transfer
- If you are counting on rental income: the lease, and confirmation of whether the suite is legal and registered
- If buying a condo: the status certificate, as early as you can get it
- If you are buying before selling: the firm sale agreement on your current home
Anything variable — bonus, commission, overtime, shift premium — needs two years of history to be used, and is averaged over that period. Gathering it early usually tells a better story than a single letter does.
The eight things that decide a GTA file
None of these are exotic. They are simply the issues that come up constantly in this market and rarely anywhere else, and each one is decided by which lender the application goes to — which is a decision worth making deliberately, before the file moves.
The $1.5 million insured-financing cap decides what you can shop for
Below $1.5 million a purchase can be insured, and the minimum down payment is 5% of the first $500,000 plus 10% of the portion between $500,000 and $1.5M — $75,000 on a million-dollar home. At $1.5 million and above, insurance is not available at all: 20% down is the floor, which is $300,000, and the set of lenders willing to write the deal narrows. That is a $175,000 swing across a single price threshold, and in the GTA an enormous amount of freehold inventory sits right around it. Establishing which side of the line your search is on is the first thing worth doing.
A condo and a house are two different financing problems
For a house, the lender is largely assessing you and the property. For a condo, they are also assessing the corporation: the status certificate, the reserve fund, the proportion of units rented out, any special assessments, and in some buildings the construction type. A building with a weak reserve or a high rental ratio can be declined by one lender and accepted by another on the identical unit. This is why a condo purchase should always carry a status-certificate review condition, and why the certificate should reach the lender early rather than on the last day.
Pre-construction closings and the appraisal gap
A lender lends against the lesser of purchase price and appraised value. Where a unit was bought pre-construction in 2021 or 2022 and appraises below that price today, the difference has to be covered in cash on closing. This has been a live problem across the GTA condo market. If you have an occupancy or closing date coming, get the file reviewed months ahead: there are usually options — a different lender, a co-applicant, an alternative lender for a term — but only while there is still time to arrange them.
Rental income: legal status and how the lender applies it
Rent from a basement apartment, a duplex or a laneway house can substantially increase what you qualify for, and the GTA housing stock is full of it. Two things decide how much it helps. First, whether the suite is legal and registered — lenders differ sharply on unregistered units, and those that will consider them usually use less of the rent. Second, how the lender applies it: adding a portion of the rent to your income is much weaker than subtracting it from the mortgage payment, and not every lender does the latter. On a GTA purchase with a suite, that single difference can change the answer entirely.
Self-employment is normal here, and it is where files fail
The GTA has a very high density of incorporated small businesses, professional practices and contractors. A business owner who writes off aggressively shows a modest taxable income, and a lender reading only the tax return will lend accordingly. The real options are adding back specific expenses, using retained earnings inside the corporation, or a bank-statement program at an alternative lender that looks at deposits instead of the return. These differ enormously between lenders — which is precisely why the lender should be chosen before the application goes anywhere.
Newcomers with a down payment and no credit history
Arriving with substantial savings and no Canadian credit file is a routine situation in the GTA, not an exotic one. There are established programs for new permanent residents, and they generally look at the down payment, employment and international credit rather than requiring a Canadian bureau history. The practical advice is to start building a Canadian credit file the day you arrive — a secured card used and paid off monthly is enough — because a few months of history opens up materially better options than none.
The stress test bites hardest at large loan amounts
You qualify at the greater of your contract rate plus two percentage points or 5.25%, whichever is higher. On a Toronto-sized mortgage those two extra points represent a very large amount of income — which is why rate cuts improve payments much faster than they improve what you can borrow. It is also why the down payment, and any rental income you can legitimately count, move your budget far more than waiting for the Bank of Canada does.
Buying before you sell, and bridge financing
Move-up buyers across the 905 routinely close on a purchase before their sale completes. Bridge financing covers that gap, but it requires a firm, unconditional sale agreement on the property you are selling — an accepted offer that still has conditions on it is not enough for most lenders. Decide the closing dates deliberately at offer stage and have the bridge arranged in principle, rather than discovering the problem in the final fortnight.
Common questions
Is it better to put down exactly 20%?
Not automatically, and this surprises people. An insured mortgage is generally priced better than an uninsured one, because the lender carries less risk — so 19.99% down with an insurance premium can end up cheaper overall than 20% down without one, depending on the rates available at the time. It genuinely depends on the numbers on the day, and it is worth pricing both before you decide.
How much rental income will a lender actually use?
It varies more than almost anything else in lending. The two questions are whether the suite is legal and registered, and whether the lender adds a portion of the rent to your income or subtracts it from your mortgage payment. The second approach is far more powerful and is not offered by everyone. On a GTA purchase with a suite, that single difference can change your maximum purchase price substantially.
What happens if my pre-construction condo appraises low?
The lender lends against the lesser of purchase price and appraised value, so the shortfall must be covered in cash on closing. If you have a closing coming, get it reviewed months ahead — there are usually options, including a different lender, adding a co-applicant, or an alternative lender for a term, but they take time to arrange. Discovering it in the final fortnight is where this becomes a genuine problem.
Does the stress test still apply if I have 20% down?
Yes. You qualify at the greater of your contract rate plus two percentage points or 5.25%, regardless of down payment size. On a Toronto-sized mortgage those two extra points represent a great deal of income, which is why rate cuts improve your payment much faster than they improve what you can borrow.
Do I have to re-qualify when I renew?
Not if the mortgage simply moves to another lender at maturity on the same terms — a straight switch does not require re-qualifying under the stress test. Extending the amortization or taking new money out is a different transaction and does. That distinction is why it is almost always worth shopping a renewal rather than signing the letter your current lender sends.
Work out which of these applies to you
A 20-minute call is usually enough to identify which one or two of these will decide your file, and what to do about them. No credit check until you say so.