If you are even remotely considering buying property in Toronto, then you are well aware of how hot the market is. Even if you aren’t buying or selling, the rise in prices of Toronto real estate has become a regular news topic, almost nightly. According to TD Canada Trust, that won’t likely change either, as they are forecasting another 25% rise in prices before the end of 2017.
So faced with these daunting numbers, how do you possibly buy a house in Toronto in 2017?
1. Face reality, figure out your mortgage budget.
The first step is to sit down with a Mortgage Broker and get a pre-approval. Realistically and honestly figure out what you can afford. This is without a doubt the single most important step. You will need a comfortable number that you are happy at, and most importantly, know what your stretch number is. Your stretch number should be your comfortable number with a little padding, but NOT at your absolute limit. You will always need a buffer for emergencies and life in general.
This is a handy tool to figure out what you can afford:
2. Figure out what you really want
Do you want a house? A Townhouse? Or are you a condo person? Figure out what your wants and then decide your needs, in other words – work backwards. Everybody wants a great house on a huge lot, but that’s not exactly reasonable these days. Once you know what you are pre-approved for, you can match your housing to your budget. You will have to be realistic and flexible unless you have an unlimited budget. And remember your house may take a while to come on the market – rarely is it sitting there waiting for you to show up.
Learn as much as you can about different types of housing, what costs are on top of the mortgage and what is included. Older homes can be great, as many of them are well built, but you can come across other variables such as lack of maintenance, old renovations not to code or finding out that building code has changed. You might find a renovation was grandfathered, but once you change it now it must be brought up to more recent code requirements.
3. Decide where you want to be, then rethink it.
I’d love a house in The Beaches. I’d also love an Audi R8. Neither are going to happen. Too expensive for me. For the house, I ended up buying in South Etobicoke. Still near the water, growing neighborhood, Etobicoke quirkiness. I still haven’t found a suitable option to the R8.
Don’t get caught up in a vision that isn’t attainable. Be flexible. If you MUST live in a certain area and it’s expensive, realize that your options go down. Also realize that every foot of the GTA is in constant motion, and what might be a less desireable area now will be a hot spot in a few short years (take Leslieville, for example).
Figure out the characteristics of the area you want to be in; see if they are anywhere else. Again for myself and my wife, we wanted to be close to the water. We also wanted park space, homey houses with character, good walking areas, and interesting retail. So for us, South Etobicoke made sense. You might want to live in North York, but maybe considering the commute is almost the same from Pickering, maybe that’s an alternative; which also has lower Land Transfer Tax than the City of Toronto. The point is, think about features and needs; don’t get stuck on the trendy areas unless you can afford them.
4. Find ways to lower your costs
There are a few ways to lower your overall costs for your home.
Renting out a basement costs you space, but can result in a significant income towards your mortgage. You might not be able to have the model train room you always wanted, but getting $1000 a month towards your mortgage helps make up for it.
Consider something that needs work, and then do it yourself. With the vast number of do-it-yourself videos on Youtube, there isn’t much you can’t do. Put in new floors, or refinish existing floors. It likely won’t turn out looking completely pro, but it will do the job AND save you money.
If that’s too daunting, consider the magic of paint. Wood panel walls are pretty horrible, but a nice coat of paint makes them survivable. Same with dated kitchen cabinets. While paint can’t fix everything, it can help make a house more appealing without breaking the budget.
Another option is co-buying, technically known as Joint Tenancy. That means a person would purchase a house with a friend, with both being joint owners. You then split the residence as you see fit. Eventually, one can buy out the other, or both can sell and reap the benefits. This options takes some faith and a serious amount of trust, but it’s becoming more common in fast-growing markets.
You may not completely understand all of the above or have additional questions which are still unanswered, in which case it’s time to use your Realtor and their knowledge. Why try and google everything and maybe think you understand all the variables. They are experienced and know what is normal and what can be done differently without ending up in heaps of trouble. Realtors are happy to help find not only the best solution,but the best solution for you. This crazy market may put the ultimate dream home out of reach for now, but it doesn’t mean you can’t get in somewhere great to begin building equity somewhere. While the market may be crazy right now, the point is to jump in before it becomes more unattainable.