There’s one cost that home buyers, especially first-time home buyers, are most concerned about when they’re out looking at homes: the price. The price of the home determines the amount of their mortgage, and that’s what they base their decision on when it comes to determining how much they can actually afford. But hold up. In Toronto, it can be pretty expensive to get a mortgage – and we’re not just talking about the recent home prices released by TREB. We’re talking about the costs you’ll incur before you ever make even one mortgage payment.

Imagine that a Toronto couple wants to purchase a condo for $240,000 (on the low end even, for condos in the city.) If they’re okay with paying mortgage insurance for several years of their loan, they can save up only a 5 per cent down payment which would be a total of $12,000 – a hefty amount when added to that low condo price, putting this couple closer to the average selling price of a condo unit in Toronto. And, if they don’t want to add even more to their mortgage and so they avoid mortgage insurance by paying the required 20 per cent down payment, that will mean $48,000 that they’ll need before they’ve even made one mortgage payment.

These costs aren’t in addition to their mortgage of course, as the down payment will go towards the overall mortgage, or purchase price. However, they are amounts that the buyers will need to come up with right away if they want to be approved for that $240,000 mortgage. And if they do end up with that insurance? Well, that’s a cost that really will be over and beyond that.

Also on top of the mortgage amount will be closing costs, usually about 4 per cent, which will cost the buyers approximately $9,600. And don’t forget that new appliances need to be purchased – $2,000 for those in the kitchen alone most likely. Even with the minimum down payment that’s about $24,000 that this couple will have to pay before they even sign their mortgage papers.

So why is this information important if every buyer has to pay them, and much of that cost will be going towards their mortgage?

Because they’re costs that you’ll need to pay before you even move in; and so you’ll need to know what will be required of you before you start looking at houses. It could affect which houses you look at.

“The lender is going to look at your assets and liabilities,” says Mark Salerno of CMHC. “What they’re going to be able to do is essentially screen for what you can afford.

“That’s going to be really vital for when you go and talk to your realtor,” he continues. “You may have a whole set of criteria, but ultimately, what you can afford is going to be the biggest factor that dictates what listings you should really be looking at.”