Real Estate

First time condo buyer

  • Last Updated:
  • May 21st, 2017 3:55 pm
[OP]
Newbie
Apr 14, 2012
7 posts
1 upvote
Montr

First time condo buyer

Hello RFD,
I'm looking for some advice / cold hard truth as to what my budget is if I'm looking to buy a condo.

My wife and I have a total of about $70,000 saved up.
My parents are willing to help out with about $100,000.
I have a job that pays about $2500 a month and my wife is currently jobless.

Our monthly expenses currently:
Phone plans - 80$ total
Food per month - 400$
Transportation - 60$
No rent

Taking into considering condo fees, taxes and monthly mortgage payments, what type of condo (price wise) should I be looking into so I'm not looking for something way over my price tag.
Thank you for taking the time to post, it is greatly appreciated!
12 replies
Deal Addict
Aug 5, 2006
2007 posts
493 upvotes
Global Village
Best to wait and raise more downpayment $ before jumping into the market imo. I presume your parents expect you to pay them the $100K back eventually. If you're determined to take the plunge now (and can get mortgage-approved) I'd set my price limit at $225K.
Last edited by scoper on May 19th, 2017 12:23 pm, edited 1 time in total.
Sr. Member
Feb 9, 2013
903 posts
143 upvotes
Mississauga
Get a mortgage pre-approval from a bank to see how much you can borrow. Typically it's 5x income, so you can borrow 5*30,000=$150,000. If you have $170,000 for down-payment, then you're looking at $150,000+$170,000=$320,000. Of course, it depends on other important factors, including debts, liabilities, credit score, job stability (your T4's in the last 2-3 years).
Last edited by jdu0ng on May 19th, 2017 12:25 pm, edited 1 time in total.
Deal Addict
Feb 2, 2014
3933 posts
754 upvotes
Toronto
Kipersoft wrote:
May 19th, 2017 12:10 pm
Hello RFD,
I'm looking for some advice / cold hard truth as to what my budget is if I'm looking to buy a condo.

My wife and I have a total of about $70,000 saved up.
My parents are willing to help out with about $100,000.
I have a job that pays about $2500 a month and my wife is currently jobless.

Our monthly expenses currently:
Phone plans - 80$ total
Food per month - 400$
Transportation - 60$
No rent

Taking into considering condo fees, taxes and monthly mortgage payments, what type of condo (price wise) should I be looking into so I'm not looking for something way over my price tag.
Thank you for taking the time to post, it is greatly appreciated!
Which city are you buying in?
Kevin Somnauth, CFA
Mortgage Agent and Real Estate Sales Representative
[OP]
Newbie
Apr 14, 2012
7 posts
1 upvote
Montr
Montreal, preferably in the city.

e: Currently, my wife and I do not have any debt, kids or any liabilities.
Deal Addict
Jun 20, 2011
1372 posts
383 upvotes
VANCOUVER
You'll looking at between 300k - 340k price point. Really really rough math = about $850 per month mortgage plus your strata. That should put you in slightly above the percentage you should spend on housing.

Phone plans - 80$ total
Food per month - 400$
Transportation - 60$
Mortgage approx. 850
Strata approx. 225
Utilities approx. 150
Insurance approx. 40
Total needed per month approx. $1805.00 without factoring in property tax and any other misc items you didn't mention like eating out / entertainment for example. You didn't mention kids so I'm guessing that might be on the horizon.

As you can see, this does not give you much wiggle room especially if a major emergency/expense hits you unexpectedly.
Last edited by DDHLeigh on May 19th, 2017 12:39 pm, edited 2 times in total.
Sr. Member
Oct 11, 2010
895 posts
264 upvotes
Charlottetown
Is the 100k from parents a gift or loan? Sounds like a hefty down payment but owning a place on only 2,500/mo income seems like a bad idea to me, does your wife have any job prospects on the horizon?
Member
User avatar
Jan 15, 2017
329 posts
159 upvotes
I would first do up a budget that includes:
  • Mortgage
  • Property tax
  • Condo fees
  • Groceries
  • Insurance (life, home)
  • Electricity
  • Cable TV & Internet
  • Phone(s)
  • Water
  • Pets
Then, have 2 bank accounts and use one to pay all the above bills (ensure you put enough in the account to cover each month) and one for discretionary spending (clothing, entertainment, furniture, vacation).

A lot of the fixed expenses are unavoidable (mortgage, condo fee, property tax, groceries, electricity, water), so make sure you include them in the budget before you decide if you can afford to buy a place.
Newbie
Mar 4, 2015
29 posts
8 upvotes
Montreal
2500/mo before or after tax? In centre-ville montreal you're looking at about 350k for a 1br condo, if you go out further you could get something for 200k that's still accessible by metro. On top of the mortgage you're looking at $1-200/mo in condo fees and $2-400 in property tax, so whatever your monthly calculated mortgage payment is, add $600 to that, and if you think you can comfortably pay that much each month then you can afford it.

If you're taking home $2500 a month, I'd suggest spending no more than $1250 on housing, which leaves you about $650 a month for a mortgage payment. This would translate to about a $150,000 mortgage, add the 70k you have saved, minus 10k for closing costs/furniture/other, so $210k to be safe. If you want to put more than 50% of your take home into housing, or put down an even bigger downpayment with the help of parents, you could go higher, but that would also increase your property tax bill and possibly condo fees, as well as restricting your budget elsewhere. If you think your income will increase in the next few years and your parents are able to help you, then perhaps as much as $300k but I wouldn't go higher than that on your income. You should also make sure to keep some cash for an emergency fund instead of putting it all into the downpayment. Interest rates are still pretty low right now

From condo fees+tax+mortgage interest you'll be looking at an effective "rent" of ~$800, with the remainder going into equity.
Deal Addict
Jul 21, 2005
1037 posts
121 upvotes
DDHLeigh wrote:
May 19th, 2017 12:39 pm
You'll looking at between 300k - 340k price point. Really really rough math = about $850 per month mortgage plus your strata. That should put you in slightly above the percentage you should spend on housing.
...
Total needed per month approx. $1805.00 without factoring in property tax and any other misc items you didn't mention like eating out / entertainment for example. You didn't mention kids so I'm guessing that might be on the horizon.
As you can see, this does not give you much wiggle room especially if a major emergency/expense hits you unexpectedly.
taxrage wrote:
May 19th, 2017 1:32 pm
I would first do up a budget that includes:
...
Then, have 2 bank accounts and use one to pay all the above bills (ensure you put enough in the account to cover each month) and one for discretionary spending (clothing, entertainment, furniture, vacation).
A lot of the fixed expenses are unavoidable (mortgage, condo fee, property tax, groceries, electricity, water), so make sure you include them in the budget before you decide if you can afford to buy a place.
+1

I strongly suggest that you do the homework of putting together a complete annual budget where the goal is cash flow positive in December.
If you can be honest with yourself on the expenses and you get a positive number at the end of the year, it’ll give you an idea of what you can pocket at the end of the day towards life savings/unexpected situations.

Is the bottom line negative? Then play with the monthly mortgage payments until you have a positive cash flow situation.
Once you’re cash flow positive, that gives you a range to play in determining what monthly mortgage payments (and thus a mortgage amount) you can afford.
Member
User avatar
Jan 15, 2017
329 posts
159 upvotes
Warped wrote:
May 19th, 2017 2:29 pm
+1

I strongly suggest that you do the homework of putting together a complete annual budget where the goal is cash flow positive in December.
If you can be honest with yourself on the expenses and you get a positive number at the end of the year, it’ll give you an idea of what you can pocket at the end of the day towards life savings/unexpected situations.

Is the bottom line negative? Then play with the monthly mortgage payments until you have a positive cash flow situation.
Once you’re cash flow positive, that gives you a range to play in determining what monthly mortgage payments (and thus a mortgage amount) you can afford.
Most budgets can be viewed as annual (e.g. vacation), but I think if the goal is to keep your stress level to a minimum you need to be cash flow positive on a monthly basis.

Our family uses the 2 bank account system (discretionary vs non-discretionary spending) and a credit card for certain types of expenses (e.g. groceries). We get into trouble when the credit card gets used for extras. In other words, when we don't stick to our budget.

When you put the non-discretionary expenses down on paper and convince yourself that they are unavoidable, you are in a much better position to decide what you can honestly afford to do.
Deal Addict
User avatar
Dec 27, 2009
3361 posts
1308 upvotes
Ottawa, ON
With a 30k household income I would not buy anything at this point.
Member
User avatar
Jan 12, 2017
200 posts
210 upvotes
ON
Chickinvic wrote:
May 21st, 2017 3:45 pm
With a 30k household income I would not buy anything at this point.
I agree.
Hopefully your wife can get a job and both of you can live off one pay check and save the other for a down payment.
You no rent right now OP, so this is better than most people's situation.
Also, for two people, $400 per month groceries could be decreased to $200 per month: $50 per week, cooking meals at home and saving an additional $200 per month towards the down payment.

This way the two of you don't have to rely on anyone else's money.

A part time weekend job would be good too for extra savings towards the down payment. Short term pain for long term gain.
make sure there is No Wynne in Ontario by June 2018

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