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hoping to buy in 2015 - how much can i afford?

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[OP]
Member
Apr 13, 2012
384 posts
24 upvotes
Toronto

hoping to buy in 2015 - how much can i afford?

(i posted a similar topic way back in april, but wanted to post this again in hopes of getting updated advice, thanks)

hey all. just wanted some input on my situation here before going for a pre-approval on a mortgage.

my average income the past 2 years is $40 000, and i plan on putting a downpayment of $50 000. i currently carry zero credit card debt and only have an $80 monthly cell phone bill to worry about. will this be enough to put towards a 30-year mortgage on a $250k condo in the gta area? or am i aiming a little too high? would my best course of action be to go to a bank first or a 3rd party when going for a pre-approval?

i also wanted to ask about location. i currently work downtown (close to union station) and my commute is 1.5 hours each way. ideally i'd be able to afford a condo downtown but i doubt one will fit in my price range and be of a suitable size for me (500+ sq.ft.). edit - i don't feel this way any longer and would actually prefer to live uptown. so i started looking at the yonge/sheppard area, where my commute time will be easily cut in half, if not more. will i be able to afford a 250k condo in that area and have it be a decent size for me? i'm looking to move out this year as well so pre-construction is not an option.

thanks a lot for any feedback, it's appreciated!
76 replies
Deal Addict
Apr 2, 2007
1423 posts
65 upvotes
Toronto
...sadly, you do not make enough as your income is still on the low side.
Even with a $50K downpayment, the max most Mortgage Brokers will lend you is around $150K + your $50K deposit.

The things you still have to factor in with condo ownership are the property taxes, maintenance fees, utilities, etc...

1 Bedroom downtown (new) = $350K+

Your best option would be to buy an older condo or 1 bedroom stacked townhouse that may come close to $200K price range.

Go get a mortgage pre-approval from a bank and you can see what options/ranges you have to work with
Sr. Member
Jun 9, 2006
836 posts
85 upvotes
Thornhill
I don't think you can afford the area with that income or at least in that neighbourhood. I think you are looking closer to $300,000 there unless it is an older building with poor layout (I imagine you are looking at $500-$600/sqft at Yonge/Sheppard).

What I would do if I were you is make a budget. Put down what you make a month and what your expenses will be. Expenses that you will need if you buy would be mortgage, property taxes, maintenance fees, and food as a minimum and see if the math balances (you make more than your expenses a month). I'm obviously not accounting for a lot of things like toiletries, TTC, entertainment, etc. If you are negative (expenses are more than you make), you can't afford it.
Deal Guru
May 1, 2012
10298 posts
10485 upvotes
Toronto
Around 200k (+/- 20k) is the absolute maximum an A-Lender is going to lend you.
Your down-payment is 50k, but you'll need around 5k of that for closing costs. So your d-p is closer to 45k.

The absolute most expensive place you can buy is 245k.

I don't think there are a lot of condo's that sell for that. I am sorry, maybe if you had a second income spouse, things would look better.
Deal Addict
User avatar
Nov 12, 2011
2952 posts
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Markham
rapsfan50 wrote: i currently work downtown (close to union station) and my commute is 1.5 hours each way. ideally i'd be able to afford a condo downtown but i doubt one will fit in my price range and be of a suitable size for me (500+ sq.ft.).
This still sounds like renting talk, no it's not ideal for you to locate downtown just because you now work there. Plenty things you need to put before your work location cuz you are talking about getting a 25 year mortgage on something. Follow the metro line til the end (no change line) and start looking, or follow the metro to closer locations (with change line).
Deal Addict
Apr 2, 2007
1423 posts
65 upvotes
Toronto
OP, you can buy a studio unit at 1 King West for $198K
Otherwise you are looking at condo/apartments off of the subway line (bus routes) that are outside the downtown core and it will be about an 1hr+ commute each way

Don't buy too old as the maintenance can be almost half your monthly mortgage
Member
Sep 22, 2014
406 posts
165 upvotes
Ottawa, ON
$250,000 condo with 50k down and 40k annual gross is too still too low. How about spending one more year to power save?
Deal Addict
Aug 4, 2006
3268 posts
2026 upvotes
Toronto
As you haven't lived downtown before I would highly recommend renting for at least a year. Get a good feel for living in the area and If you love it , buy. If you hate it you can move out relatively easy. Buying is generally for longer term if you plan on actually living there and not everyone loves living in the core (or whatever area). Just my $.02. I lived in a few different areas before I found where I wanted to stay.
Deal Fanatic
Dec 5, 2009
5740 posts
3568 upvotes
I would also suggest you rent for a while and save for a larger down payment if your are set on those locations.

Or find something a bit further out but close to a GO station for a train ride to union.
[OP]
Member
Apr 13, 2012
384 posts
24 upvotes
Toronto
thank you everyone for your feedback. before i go further, please disregard what i said about preferring to live downtown. i think i would actually prefer to live uptown if it would mean living in a bigger space (as opposed to a bacherlor condo downtown). i live in the markham area, so currently i take a 40-45 minute bus just to get to finch station, then another half-hour by subway to get to union. if i could cut that 40-45 time off my commute by living close enough to to the subway line then i wouldn't have a problem living uptown.

also, if it matters, i would prefer to move out during the fall so that would give me another half-year to save up. if i upped my downpayment to 60-65k would that matter much or is the bottom line the fact that i don't make enough?

thanks again for the help!
Penalty Box
Aug 11, 2005
4175 posts
1430 upvotes
Why don't you take the go train? Or try renting downtown first. You can get a place with a roommate for about $1000. If you factor in the gas you save, parking at finch station, metropass etc., it's really not that much more.
Deal Fanatic
Jul 10, 2003
7808 posts
3362 upvotes
qster wrote: OP, you can buy a studio unit at 1 King West for $198K
Otherwise you are looking at condo/apartments off of the subway line (bus routes) that are outside the downtown core and it will be about an 1hr+ commute each way

Don't buy too old as the maintenance can be almost half your monthly mortgage
I wouldn't recommend One King West...their maintenance fees are higher than rents in some buildings!
Deal Fanatic
Dec 6, 2006
5408 posts
1657 upvotes
Toronto
Not a fan of condo. I'd rather rent if condo is the only affordable purchase option right now.
Deal Addict
Nov 17, 2004
3083 posts
1408 upvotes
rapsfan50 wrote: thank you everyone for your feedback. before i go further, please disregard what i said about preferring to live downtown. i think i would actually prefer to live uptown if it would mean living in a bigger space (as opposed to a bacherlor condo downtown). i live in the markham area, so currently i take a 40-45 minute bus just to get to finch station, then another half-hour by subway to get to union. if i could cut that 40-45 time off my commute by living close enough to to the subway line then i wouldn't have a problem living uptown.

also, if it matters, i would prefer to move out during the fall so that would give me another half-year to save up. if i upped my downpayment to 60-65k would that matter much or is the bottom line the fact that i don't make enough?

thanks again for the help!
Unfotunately, the bottom line right now is that you don't make enough unless you go in with a much bigger down payment (think $100k or more), otherwise your monthly costs will be more than you bring home.

Since you're in Markham, have you thought about getting a cheap car and then driving to the nearest GO station? Even though you'll have to spend more money on gas, insurance and the car itself, you'll easily cut your commute down to less than an hour, which would give you more incentive to stay at home and save for longer.

I agree that moving downtown and renting is also a good idea. But then it'll take you even longer to save, unfortunately.
Deal Fanatic
User avatar
Nov 2, 2013
5610 posts
1474 upvotes
Edmonton, AB
Can't you only get a 25-year mortgage now?

Anyways that's up for your bank to decide. Your monthly debt payments can't exceed 1/3 of your monthly income. I believe your expected housing costs are also factored into this. Doubt they will even approve you.

From the sounds of it though even if you get approved you'd be extremely strapped for cash. You're taking home about 2500/month and your mortgage plus bills, condo fees and such may easily reach over half of this, leaving you possibly around 1000 to live on for the month, which is not much.
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Moderator
May 28, 2012
11695 posts
4238 upvotes
Saskatoon
Are you just starting out in your career...meaning you are near base wage and will make more in the coming years? I wouldn't want to buy something at the top of my affordability and struggle to make ends meet indefinitely.
Deal Guru
May 1, 2012
10298 posts
10485 upvotes
Toronto
FirstGear wrote: Can't you only get a 25-year mortgage now?

Anyways that's up for your bank to decide. Your monthly debt payments can't exceed 1/3 of your monthly income. I believe your expected housing costs are also factored into this. Doubt they will even approve you.

From the sounds of it though even if you get approved you'd be extremely strapped for cash. You're taking home about 2500/month and your mortgage plus bills, condo fees and such may easily reach over half of this, leaving you possibly around 1000 to live on for the month, which is not much.
With 20% down, you can go as high as 35 years. I think I read somewhere that people with 20% down mostly elect to do 30 years, which 99% of A-Lenders will allow you to do.
Deal Addict
May 28, 2005
2400 posts
345 upvotes
OP my situation is very similar to yours...almost exactly except I make a little more. Looking at Yonge n Sheppard - the options are very limited for Condos under $250k.

Anikiri - What are the pros/cons going with a longer mortgage term?
...
Member
User avatar
Jan 30, 2014
266 posts
30 upvotes
Ontario
rapsfan50 wrote: thank you everyone for your feedback. before i go further, please disregard what i said about preferring to live downtown. i think i would actually prefer to live uptown if it would mean living in a bigger space (as opposed to a bacherlor condo downtown). i live in the markham area, so currently i take a 40-45 minute bus just to get to finch station, then another half-hour by subway to get to union. if i could cut that 40-45 time off my commute by living close enough to to the subway line then i wouldn't have a problem living uptown.

also, if it matters, i would prefer to move out during the fall so that would give me another half-year to save up. if i upped my downpayment to 60-65k would that matter much or is the bottom line the fact that i don't make enough?

thanks again for the help!
Although living in uptown is slightly affordable than living in downtown, the cost of the uptown condos are still relatively high. A quick search through the MLS website shows condos located along Yonge Street and through major intersections as Sheppard Ave, Finch St, up to Cummer... has condos with 1B/Br @$300K and 2B/1Br @$400K. With your down payment you might not qualify to get into these properties. Probably you could hold on until Fall as per your original plan and save more towards the down payment. You could also consider getting a 2B/Br unit and rent one room since this location is pretty desirable. The only benefit or drawback (double edge knife) is that by waiting longer either the value of the properties goes up or down.
Deal Guru
May 1, 2012
10298 posts
10485 upvotes
Toronto
Wilmega wrote: OP my situation is very similar to yours...almost exactly except I make a little more. Looking at Yonge n Sheppard - the options are very limited for Condos under $250k.

Anikiri - What are the pros/cons going with a longer mortgage term?
There are no cons with a longer mortgage term. You can always shorten the amortization when renewing. I guess the one con is that you are paying off your mortgage in more time, hence incurring more interest. However, as I have pointed out before, if you are financially smart, you can take full advantage of longer amortizations. As long as you have some decent pre-payment options, you should take a longer amortization in order to buffer yourself for potential financial issues later on (cause you never know).

The pros for longer term is that your payments are less, sometimes a lot less. But you should pay the mortgage like it is a 25 year amortization by utilizing your pre-payment privileges. However, if money is tight and you can only meet the minimum, you are able to do so since your payments are lower now that your amortization is longer. I hope I make sense.

It is mostly about flexibility.

I have a 30 year amortization, but I pay at a 20 year amortization while utilizing a cash back mortgage (which was entirely paid back). At the end of my term, I can easily renew at 20 years, instead of 25, while payments are much lower than they are now.

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