Playing by New Rules: What Changed for Toronto Real Estate in 2025–2026

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The rules of the real estate game changed significantly in late 2024 and early 2025—and if you’re buying or selling in Toronto, there’s even more to know. Between expanded mortgage options, a capital gains tax reversal, new city taxes, and tightened short-term rental rules, there’s a lot to keep straight. Here’s your complete guide to what’s changed and what it means for you.

Mortgage Rules: The Big Changes

The federal government rolled out major mortgage reforms in December 2024 and January 2025 that opened up new options for buyers.

30-Year Amortizations Are Back (and Expanded)

Effective December 15, 2024, 30-year amortizations are now available to:

• ALL first-time homebuyers purchasing any property type
• ALL buyers (first-time or not) purchasing new construction

Previously, this was limited to first-time buyers purchasing new builds only. Now a first-time buyer can get a 30-year amortization on a resale condo, townhouse, or detached home.

What this means in practice: Stretching your mortgage over 30 years instead of 25 drops your monthly payment by roughly 9%. Here’s an example using a $700,000 mortgage at 4.5%:

Amortization	Monthly Payment	Total Interest Paid
25 years	$3,871	$461,300
30 years	$3,534	$572,240

That’s $337 less per month—but roughly $111,000 more in interest over the life of the loan. Do the math and decide what works for your situation.

Higher Insured Mortgage Cap: $1.5 Million

Effective December 15, 2024, the cap for insured mortgages increased from $1 million to $1.5 million. This is a big deal for Toronto buyers.

The minimum down payment structure remains unchanged: 5% on the first $500,000, 10% on the remainder up to $1.5 million.

Example: A $1.25 million home now requires a down payment of $100,000:

• 5% on first $500K = $25,000
• 10% on remaining $750K = $75,000
• Total: $100,000

Before December 2024, this same home required a minimum 20% down payment—$250,000—because it exceeded the $1 million insured mortgage threshold.

For buyers who’ve been priced out of Toronto’s detached and semi-detached market due to down payment requirements, this change opens up significantly more options.

Secondary Suite Refinancing Rules

Effective January 15, 2025, homeowners looking to add a secondary suite (basement apartment, garden suite, etc.) can now refinance up to 90% loan-to-value, up from 80%. The property value limit is $2 million, and 30-year amortization is allowed.

The Canada Secondary Suite Loan Program also doubled its maximum from $40,000 to $80,000, making it easier to finance suite construction.

Stress Test Changes at Renewal

Some good news for homeowners facing mortgage renewal: insured mortgage holders can now switch lenders at renewal without re-qualifying under the stress test. This means you can actually shop around for better rates without worrying about whether you’d pass the stress test at today’s qualifying rate. More competition among lenders should mean better deals for renewers.

Important: This relief applies only at renewal. If you’re buying a new property, the stress test still applies in full—you must qualify at the greater of your contract rate plus 2%, or the benchmark rate (currently 5.25%). The higher insured mortgage cap ($1.5M) and 30-year amortization options don’t change this. You still need to meet CMHC’s underwriting requirements: minimum credit score, debt service ratios, and income verification. The new rules raise the ceiling, but you still have to qualify to get through the door.

Interest Rates: Where We Are and What’s Coming

Current State (January 2026)

• Bank of Canada overnight rate: 2.25%
• Prime rate: 4.45%
• Down from: Peak of 5% overnight / 7.2% prime in 2023

The Bank of Canada cut rates seven times between June 2024 and January 2025, bringing us from crisis-level rates back to something more sustainable.

2026 Outlook

Most economists expect rates to hold relatively steady through 2026. The Bank of Canada has signalled that the current policy rate is appropriate given inflation trends and economic conditions.

What this means for buyers:

• Variable rates are now below fixed rates for the first time in three years—hovering around 3.45–4%
• 5-year fixed rates are in the 3.94–4.5% range
• The “which rate type should I choose” question is back to being a real decision

The Renewal Wave

If you locked in at the ultra-low rates of 2020–2021, your renewal is coming—or already here. The math isn’t pretty, but it’s less severe than feared.

Example using Canadian mortgage calculations:

Original mortgage (2020): $500,000 at 1.8%, 25-year amortization

• Monthly payment: $2,064

After 5 years, remaining balance: ~$418,000 Renewal (2025): 4.2% for remaining 20 years

• New monthly payment: $2,566

That’s an increase of $502/month—roughly 24% higher. Not fun, but manageable for most households. The key is planning ahead: know when your renewal is coming and budget accordingly.

Capital Gains Tax: What Actually Happened

Remember the proposed capital gains tax increase that had investors scrambling in 2024? Here’s how it played out.

The Change That Didn’t Happen

The 2024 federal budget proposed increasing the capital gains inclusion rate from 50% to 66.67% for gains over $250,000. This would have meant paying tax on two-thirds of your profit instead of half—a significant hit for anyone selling an investment property.

The implementation was originally scheduled for June 2024, then deferred to January 2026. Then, on March 21, 2025, Prime Minister Carney cancelled the proposed increase entirely.

What This Means for You

• Capital gains inclusion rate stays at 50%. You pay tax on half your profit from selling an investment property, just like before.
• Principal residence exemption is unchanged. Sell your primary home? Still no capital gains tax.
• Investment property sellers: Status quo maintained. Plan accordingly, but no new tax burden.
• Lifetime Capital Gains Exemption increased to $1.25 million for qualifying small business shares, farm property, and fishing property.

Pro Tip: If you were holding off on selling an investment property because of the proposed tax change, that reason is gone. Now it’s purely a market timing and personal finance decision.

Foreign Buyer Ban: Extended Again

The prohibition on foreign buyers purchasing residential property in Canada has been extended to January 1, 2027.

Who’s Affected

The ban applies to non-Canadians purchasing residential property in census metropolitan areas (CMAs) and census agglomerations (CAs)—essentially all urban and suburban areas, including the entire GTA.

Who’s Exempt

• Canadian citizens and permanent residents
• Non-Canadians with valid work permits (meeting certain criteria)
• Refugees and protected persons
• Non-Canadians purchasing jointly with a Canadian citizen or permanent resident spouse
• Properties in rural areas outside designated CMAs/CAs
• Vacant land zoned for residential development

Ontario’s Non-Resident Speculation Tax

On top of the federal ban, Ontario’s Non-Resident Speculation Tax (NRST) remains at 25% of the purchase price for any non-Canadian buyers who do qualify for an exemption. Between the ban and the tax, foreign investment in Toronto real estate remains effectively shut down.

Toronto’s Municipal Non-Resident Speculation Tax

As of January 1, 2025, Toronto added its own layer: a 10% Municipal Non-Resident Speculation Tax on top of the provincial NRST. So non-Canadian buyers now face a combined 35% speculation tax—plus the federal ban. The message is clear.

Toronto-Specific Rules: What’s New for 2026

If you’re buying, selling, or already own a property in Toronto, these local rules matter just as much as the federal ones.

Property Taxes: A Breather (Sort Of)

After back-to-back increases of 9.5% (2024) and 6.9% (2025), the City of Toronto is proposing a much smaller 2.2% increase for 2026. That breaks down to:

• 0.7% increase to residential property tax
• 1.5% increase to the City Building Fund levy

For context, on the average assessed Toronto home (~$692,000), the 2025 increase added about $210 annually. The 2026 increase would add roughly $70.

Note: Property assessments are still frozen at January 1, 2016 values. MPAC hasn’t updated assessments since the pandemic, which means your tax bill doesn’t reflect your home’s current market value—for better or worse.

Luxury Land Transfer Tax Increase (Effective April 1, 2026)

Toronto City Council approved a hike to the Municipal Land Transfer Tax (MLTT) on homes sold for more than $3 million. The new graduated rates (effective April 1, 2026) are:

Purchase Price	New MLTT Rate	Previous Rate
$3M – $4M	4.40%	3.50%
$4M – $5M	5.45%	4.50%
$5M – $10M	6.50%	5.50%
$10M – $20M	7.55%	6.50%
Over $20M	8.60%	7.50%

Remember: This is the municipal portion only, on top of the provincial land transfer tax. On a $5 million home, the combined provincial and municipal LTT now exceeds $250,000.

What this means: If you’re buying (or selling) in the luxury market, the calculus just shifted again. Buyers closing before April 1, 2026 avoid the new rates. Sellers may see increased buyer sensitivity to closing costs at these price points.

Vacant Home Tax: Don’t Forget to Declare

Toronto’s Vacant Home Tax remains at 3% of your property’s assessed value if your home is vacant for more than six months per year.

The 2025 declaration deadline (for the 2024 tax year) was April 30, 2025. If you own property in Toronto, you must declare annually—even if the property is your principal residence or tenanted. Failing to declare means your property is automatically deemed vacant, and you’ll receive a tax bill.

For 2026: The declaration deadline for the 2025 tax year is expected to be April 30, 2026.

Short-Term Rentals (Airbnb): Tighter Rules, Higher Costs

Toronto has some of the strictest short-term rental regulations in North America. If you’re thinking about Airbnb income, here’s what you need to know:

The basics:

• You can only short-term rent your principal residence—not investment properties
• Registration with the city is mandatory
• 180-night limit per calendar year for entire-unit rentals
• No limit on partial-unit rentals (renting a room while you live there)

2025–2026 changes:

• Municipal Accommodation Tax (MAT) increased to 8.5% (from 6%) on all rentals under 28 nights. This temporary increase runs from June 1, 2025 through July 31, 2026—timed for the FIFA World Cup.
• Platforms like Airbnb must verify your city registration number via API before allowing listings
• Fines for violations can reach $100,000 for serious infractions

Condo owners: Check your building’s rules. Most Toronto condos prohibit or restrict short-term rentals regardless of city regulations.

Garden Suites and Laneway Houses: Easier to Build

Ontario Regulation 462/24 (effective November 2024) made it significantly easier to build garden suites and laneway houses across the province. Key changes:

• Reduced setback: Garden/laneway suites now only need 4 metres separation from the main house (previously 5–7.5 metres in Toronto)
• Angular plane requirement removed: No more complex roofline restrictions on upper floors
• 45% lot coverage allowed for properties with an additional residential unit
• No more FSI limits for properties adding a garden or laneway suite

What this means: Roughly 80% of Toronto homes can now potentially support a garden or laneway suite. Combined with the new federal secondary suite refinancing rules (90% LTV, $80K loan program), building rental income into your property is more accessible than ever.

Related: All About Laneway Suites

Other Rules to Know

OSFI’s New Rules for Investor Mortgages (2026)

Starting Q1 2026, Canada’s banking regulator (OSFI) is tightening how banks treat investment property mortgages. This one’s important if you’re building a rental portfolio.

The key change: No more double-counting income

Previously, investors could use the same income—whether employment income or rental income from existing properties—to qualify for multiple mortgages. That’s ending. Under the new Capital Adequacy Requirements (CAR) guideline, income used to qualify for one mortgage must be “removed or corrected for” when assessing additional properties.

What this means in practice:

• Each property needs to stand more independently on its own rental income
• Scaling a portfolio using leveraged rental income becomes significantly harder
• Banks must hold more capital against mortgages classified as “income-producing residential real estate” (IPRRE)—where more than 50% of qualifying income comes from rent—which typically means higher rates or stricter terms for borrowers

Who’s most affected:

• Portfolio investors trying to grow using rental income from existing properties
• Buyers in markets with high cap rates and low purchase prices (Calgary, Edmonton, Halifax) where rental income dominates qualification
• Toronto investors are less affected because property values are high relative to rents, meaning employment income typically drives qualification

What hasn’t changed: You can still use rental income to qualify for a mortgage. OSFI clarified in November 2025 that these rules are about bank capital requirements, not underwriting standards. The issue is using the same income twice.

Pro Tip: If you’re planning to expand your portfolio, talk to a mortgage broker now about how the new rules will affect your borrowing power. The math may look very different in 2026.

Property Flipping Tax

The CRA’s anti-flipping rules are now fully in effect. If you sell a property within 365 days of purchase, the profit is taxed as ordinary income—not capital gains. The principal residence exemption doesn’t apply.

Exceptions: Death, disability, separation/divorce, job relocation, and certain other life events. But don’t plan to flip for profit and expect capital gains treatment.

Federal Underused Housing Tax

The federal Underused Housing Tax (UHT) applies a 1% annual tax on vacant or underused residential property owned by non-Canadians, non-residents, and certain Canadian corporations. Even if you qualify for an exemption, you may still need to file an annual return.

The BREL Bottom Line

Here’s a quick cheat sheet of the rules that matter most by situation:

First-Time Buyers:

• 30-year amortization available on any property type (insured and uninsured)
• Insured mortgages up to $1.5 million (down payment as low as 5–10%)
• Land transfer tax rebates still available (up to $4,000 Ontario + $4,475 Toronto)
• FHSA and RRSP Home Buyers’ Plan can be combined—up to $100K in tax-advantaged funds per person
• For the full breakdown of first-time buyer programs, see our Complete First-Time Buyer Guide

Move-Up Buyers:

• 30-year amortization available on new construction only if insured(unless you’re technically still a first-time buyer)
• Higher insured cap may help if you’re stretching for your next home
• Bridge financing rules unchanged—talk to your lender early
• New luxury LTT rates apply to homes over $3M (April 2026)

Investors:

• Capital gains inclusion rate stays at 50%
• OSFI 2026 rules: can’t double-count income across multiple mortgages—affects portfolio scaling
• Secondary suite financing improved if you’re adding rental units
• Foreign buyer ban extended—affects resale to international buyers
• Short-term rental rules are strict—investment properties don’t qualify for Airbnb

Sellers:

• No capital gains changes on investment properties; primary homes are still exempt
• Vacant home tax applies if property isn’t occupied (declare annually!)
• Flipping within 365 days = ordinary income tax
• New luxury LTT may affect buyer pool for $3M+ homes

Homeowners:

• Property tax increase proposed at 2.2% for 2026 (much lower than recent years)
• Garden suite/laneway house rules relaxed—more options to add rental income
• Mortgage renewers can now switch lenders without stress test re-qualification

Questions about how these rules apply to your situation? Get in touch – we’re here to help you navigate it.