How to Buy a Condo in Toronto if You Make Under 100K a Year

Shaun Hildebrand, senior vice president of Urbanation, a market analysis firm that provides Real Estate Insights on the condominium, rental, and property investment markets in the GTA, found that in the first quarter of 2018 the average price of a resale condominium in Toronto reached a high of $558,000, which was up from $510,000 during the same period in 2017. He went on to conclude that at those prices, homebuyers would need an income of at least $100,000 in order to qualify for a mortgage given the new lending rules in place (see stress test and gross debt service ratios). With dwindling supply and demand for housing on the rise, condo prices are not going down any time soon, so the faster you understand what you have to do to get one, the better. Let’s be clear though, not everyone will be able to purchase a condo. Hilderbrand notes that those being priced out of home ownership are leasing apartments instead, which, in turn, is driving up rental prices in the city. Some people are resigned to rent forever, and that’s ok. But if you’re determined to have a place that you call your own, then read on… We already know that by using the example above via Urbanation that the average price of a resale condominium in Toronto is $558,000 and in order to satisfy current lending standards, a homebuyer would have to an income of at least $100,000. If you’re like a number of hard-working individuals in the city who are currently earning a good income ($60,000 – $80,000+), but just can’t see yourself pushing past the $100K salary threshold any time soon, here are a few options that will help you go from renting to owning in no time.

1. Save As Much Money as You Can

The first step is saving as much money as you can for a down payment. The minimum you can put down is 5% but always aim to put down 20% so that you can avoid paying mortgage insurance.

2. Pool Your Funds

If you’re a couple or have good friends consider pooling your resources together to afford a larger property. Ask yourself if you can share a house with family members or friends?

3. Have Someone Co-Sign your Mortgage

If you can’t afford to buy a home or aren’t in a position to get the best mortgage rates and terms, then consider having someone co-sign your mortgage. When you have someone co-sign your mortgage it’s because you are not yet a strong enough applicant on your own, so you need someone else who might be in a better credit and financial position as you (Most likely your parents).

4. Co-own a Property with Your Parents

Co-ownership between parents and their children is another way to help get you into a property quicker. In a co-ownership arrangement, parents and children don’t even have to live together, it can just be a way to help adult children qualify for a mortgage while investing in a property together. As property values increase, the equity gains can be shared between parents and children when it comes time to sell.

5. Ask Your Family to Help With Your Down Payment

Chances are your parents purchased a home way back in the ’80s or ’90s, which, over the past 20-30 years has increased in value astronomically. If they are willing to help you by borrowing against their own home, that may be all the assistance you will need to qualify for a mortgage.

REALITY

The reality is that in today’s market getting creative when it comes to finding ways to qualify for a mortgage is the norm. Unfortunately, it is increasingly unlikely that homebuyers making less than $100K can afford the properties they want unless they make use of one or a combination of the options above. My Advice – If your goal is home ownership, then do everything you can to get a condo now and start paying it down as soon as you can because with prices continuing to rise, this may be your only chance to enter the market. Just simply getting into the market is crucial. The good news is if the appreciation keeps going at the rate we’ve been experiencing, then this will give you the opportunity to trade up when the time comes.

Do you have any questions about finding ways to buy a condo with your current salary? Call, text, or email me anytime!