[wonderboy416]

Hi, those of you that know me have seen me go from living in my parents house in Port Credit, to buying a house with the GF in Milton to moving out and now renting a townhouse with 2 friends downtown. I'm lucky to be paying a low rent amount which has let me keep my car and afford some other luxuries but I'm getting the itch to buy my own place, problem is... I don't have much saved up at all. The house in Milton was entirely in my GF's name (her dad made a substantial down payment for us) and it was agreed that my half of the mortgage would be deemed rent should we breakup and move out, which is what happened, I took a pretty hard loss as I could have been renting for MUCH less and saving up a lot more, instead I had to spend several grand on some new furniture, first/last months rent and I actually wound up in the hole a bit.

Anyway, long story short, I'm pretty clueless when it comes to this stuff on my own to be honest. I'm aware first time home buyers can get their foot in the door with little to no down payment but I have no idea how that works and have cold feet about walking into my personal bankers office loaded with stupid questions right now.

What are the minimum costs required to say... purchase a $200K condo? I have a few grand from my RSP to throw at it but not much else). I'm aware I'd be subject to mortgage insurance and I'm not too worried about the monthlies (I can always ditch the car and replace it with a metro pass for an easy $600/mth savings or when the lease runs out just not replace it). I know the logical answer is to just save up as much as possible and come back when I actually have real savings... but I'd rather be owning today with mortgage insurance then saving for a few years and renting.

Any help/advice is much appreciated, thx!

 

[afransen]

I hear that looking for a mortgage with very little down makes the borrowing costs rise substantially due to mortgage insurance. This is why many people typically borrow money to make the 25% down payment (but don't tell the bank about the borrowing). I'd recommend renting for a bit until you have $10 - 15k minimum as a downpayment, unless you can get your parents or somebody to lend you some money for the downpayment.

 

[BuildTO]

I've been in my first condo for about a month and a half now. Things to keep in mind when you make the switch from renting:

- mortgage
- maintenance fees
- taxes
- condo insurance
- possibly utilities
- any other monthly bills? RSP?

I sold my car since I didn't want to pay a million dollars for a parking space. It was paid for long ago, but I am happy to be saving on parking, gas, manitenance, and insurance.

Don't forget too, that you need to have about $5K for closing and moving costs.

I've also heard people recommend that in general it's a good idea - for anyone except the independently wealthy - to have about 3 months salary saved at all times in case of emergencies (e.g., losing your job).

 

[Jarrek]

Well, you have a few options. First off, as you probably know, you can use up to $20,000 of your already contributed RRSP's for a down payment on your FIRST home purchase. This is called the Home Buyers Plan (HPB). What I suggest, is that 3 months before you actually plan to purchase a home, deposit as much as you can into your RRSP's, and get a hefty tax refund come April. You'll have to start repaying your loan two years from your purchase date, but this is in very small incraments. On the first year for example, you only have to pay back $1500.

You can read up on HBP here:

http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/hbp/menu-e.html

Some banks will allow you to put absolutely nothing down, but you'll have to prove that you have a good & stable income in order to do this. You'll also almost always need at least 1.5 to 2% of the purchase costs for closing fees. BMO has a 0 down mortgage, and they actually pay down 5% of purchase.

My advice is to save up at least 10K, because you'll have to consider property taxes, land transfer taxes, utilities, etc.

In the end it all depends on how much you can afford, and how much you have saved up. Talk to a banker, ask questions, they're never stupid.

BMO 0-down mortgage
https://www4.bmo.com/personal/0,2273,35649_36730,00.html

Scotia Free Downpayment
http://scotiabank.com/cda/content/0,1608,CID10969_LIDen,00.html

Another good link on 0-down mortgages
http://www.cbc.ca/news/yourinterview/2007/06/caamp_president_jim_murphy_on_1.html

 

[Hydrogen]

Don't buy beyond your means - ever.

Go to a bank now and find out what you qualify for in terms of a pre-approved mortgage. It is a useful reality check.

 

[AndreaPalladio]

Actually, you can repay the money you take out of your RRSP for the HBP the next day if you want to. You only have to claim it on your taxes in installments over the repayment plan. There is a huge tax it if you claim that you are repaying more than the minimum in any one tax year.

Also, your bank or where every your RRSPs are will probably set you up on a monthly repayment plan, unless you are already doing automatic contributions anyway.

If you put less than the minimum down payment - 10%? 20% - a portion of each mortgage payment goes to pay the CMHC insurance.

And ditto what Hydrogen said. Your first step in buying a place is to find out what you can borrow - no point looking until you know what you can afford.

 

[urbandreamer]

If you gotta yank money out of the rrsp....

You can't afford to buy a place. That simple.

Ditch your car NOW! Save at least 50% of your monthly income and in 2-3 years, you can afford to buy a decent place in a smaller building--downtown eastside perhaps?

I could easily afford to buy a huge pad (i'm a hard core saver--75% of income i save ) but knowing the true wholesale price of a condo, buying retail pisses me off so instead I like to move around the city/world renting interesting places. I would really just buy a house--but i'm waiting for my "perfect" house i've been staring at for years to come up for sale. Investing in real estate is also an option--but ultimately, too conservative for my risky tastes. (I'm a high risk gambler--my day job

 

[RJR123]

Borrowing from an RRSP for a downpayment is an extremely common way for people to purchase a place, and doing so is not reflective of one's ability to afford a condo.
It's difficult to save a big chunk of change up-front for a down payment, but for many it's not as difficult to afford the monthly carrying costs of a condo.
So go ahead and borrow from an RRSP if you have to.

And I totally agree about ditching the car...HUGE money saver.

 

[beaconer]

If you gotta yank money out of the rrsp....

You can't afford to buy a place. That simple.

That is blatantly false.

If you are in your young to mid 20's, and the savings your are building when you first start off your career are outside of an RRSP in an investment, you are saving money at a very slow/inefficient rate.

First because you are not deducting the RRSP from your income and paying higher income taxes and second because your investment is not growing tax free.

 

[Ahsun]

Sorry, don't really mean to be an ass, but weren't you the one who was bragging about their house in Milton, showing photos of it, and photos of your new Pontiac G6 and giving people crap for not wanting to live your suburban lifestyle? I think the last time I read something from you before I just outright started ignoring you was about buying a big-screen TV.

Correct me if I'm wrong.. but weren't you also saying that everyone should make some wise investments to get where you "were" and that you sometimes play online poker and make money?


edit... ok so maybe I did want to be an ass... sorry. Good Luck.

 

[Hydrogen]

So now he's come over to the "dark side."

Cut him some slack.

 

[noodlesalad]

Hi there, I work in the mortgage industry and own a condo myself so I can throw out some #'s just to give you an idea on whether things are feasible.

Example:

-$200,000 purchase price (no parking spot)

-$0 down payment (need pretty decent credit)

-insurance premium $7000 (35 yrs)

-amortization: 35 yrs to pay it all off

-mandatory bills:

1. mortgage: approximately $1100/month
2. condo fees: $250/month
3. ppty tax: $200/month

INCOME REQUIRED: approx $50,000.

Also keep in mind, you'll have additional expenses: heat/hydro (say $40/month), cable ($50), internet ($50), cellphone ($40), food ($?)

It is possible. You can probably qualify for a mortgage based on the rough numbers assuming you've got a job and decent credit. Budgeting and money management are essential to making sure you don't run into financial difficulty.

 

[noodlesalad]

I should probably mention that the above scenario is pushing your affordability to the limit. If you experienced in budgeting yourself month-to-month you could probably make things work. Otherwise, you probably want to wait till either you have some money to put down or make more money (or both).

 

[rbt]

I've also heard people recommend that in general it's a good idea - for anyone except the independently wealthy - to have about 3 months salary saved at all times in case of emergencies (e.g., losing your job).

Keeping 3 to 4 months of expenses saved is a good idea. Hopefully expenses != income.

 

[wonderboy416]

Sorry, don't really mean to be an ass, but weren't you the one who was bragging about their house in Milton, showing photos of it, and photos of your new Pontiac G6 and giving people crap for not wanting to live your suburban lifestyle? I think the last time I read something from you before I just outright started ignoring you was about buying a big-screen TV.

Correct me if I'm wrong.. but weren't you also saying that everyone should make some wise investments to get where you "were" and that you sometimes play online poker and make money?


edit... ok so maybe I did want to be an ass... sorry. Good Luck.

Yes you're quite the ass. Things don't always work out, the poker still does me well. I was really looking to see what I could get away with if I were just scraping along (worst case scenerio). I actually do have a nice chunk of change coming my way from the sale of the house but have no idea when that will arrive and would rather own sooner than later. I certainly wasn't bragging in my prior post, there was really nothing to brag about I'm sorry you took it that way. But yes, I'll repeat, you're quite the ass for making the post you did. Thanks, I feel better about myself now lol.

noodlesalad, thanks for your informative post. I think I could live comfortably under that scenerio.. you give me hope lol.