This topic may sound a little rhetorical, for a couple of reasons. Firstly, not everyone is going to be able to afford to buy a property in Toronto, and if you can’t… you can’t. plain and simple. It’s probably not a popular comment, especially to some of those that grew up in this fair city, but it is a fact.
As much as I believe everyone in Canada needs a home and we should do more to make this a reality, not everyone is going to be able to have a home that they own in downtown Toronto. Not unlike any other major metropolis in the world, the demand for housing in the downtown core still outweighs the supply, and it would be a physical impossibility to provide housing to every Canadian that wanted to live in Toronto.
Have you checked out our podcast yet? Listen to The Last Honest Realtor right here or anywhere else you get your podcasts.
What if You Can’t Afford a Mortgage?
Secondly, it may seem simply rhetorical because the simple answer for anyone who can’t buy a property is to rent one. Easy answer, right? Well yes, if you can not afford to buy a home in Toronto, but want to live here, there are lots of rental options and despite what you may hear, there’s lots more options coming online over the next few years. There’s some obvious pros and cons to both renting and owning, but there’s are a lot people out there that would like to buy and don’t think they actually can. They may not think they have the down payment, the income, or the budget to afford a home in Toronto, but there’s a lot of new initiatives that have come or are coming this year to help finance your next move.
Do you have more questions about buying a home in Toronto? Read these posts next:
- How Much Does it Actually Cost to Own a Home in Toronto?
- Should I Buy a Home that’s Been on the Market For a Long Time?
- Are Interest Rates Important When Buying a Home?
Changes That Will Help More Torontonians Into Home Ownership
Purchase Price Cap Increase for Insured Mortgages: Homebuyers purchasing an owner-occupied property, with less than a 20% down payment, can now purchase up to $1,499,999 (previous cap was $999,999).
30-Year Amortization for Insured Mortgages – First Time Homebuyers: First-time homebuyers purchasing an owner-occupied property, with less than a 20% down payment, can now select up to a 30-year amortization to lower their monthly payments (previous cap was 25-year amortization).
30-Year Amortization for Insured Mortgages – New Construction: Homebuyers purchasing an owner-occupied new construction property, with less than a 20% down payment, can now select up to a 30-year amortization to lower their monthly payments (previous cap was 25-year amortization).
Learn more about 30-year mortgages in Canada with this post right here.
How Will These Changes Help Homebuyers in Toronto?
There’s a lot of material changes here, especially for those first-time home buyers, self-employed individuals, and those with the means but not a large down payment. If you’re curious about what programs you might qualify for or what you might be able to afford, your first step is to talk to a reputable mortgage broker. Much like how a qualified real estate broker can have a huge impact on your bottom line, finding and working with the right mortgage broker can have life changing effects too.
What to do if you can’t afford the mortgage you already have?
This is a very different problem to solve and one that has become more common over the last couple years with rising interest rates. One in three Canadians are struggling to make ends meet, and although mortgage delinquencies are still relatively low, especially in Toronto, it’s something we could see more of if inflation continues to rise.
If you do find yourself worried about how you can afford your mortgage moving forward, the first thing you should do is talk to your lender. Mortgages are long-term partnerships by their very nature and banks are not overly interested in losing clients or foreclosing on properties. They will typically offer you a few options if you are struggling to make, or are continually late with payments including;
- Offering a grace period before any penalties are levied for late payments
- Deferring payments to a later date in order to better match your income stream
If your bank or lender can’t make things work, you can also look at some alternative lenders who may be able to;
- Restructure some or all of your mortgage to make “interest only” payments. This will increase the amount of time it will take to pay off the property, but will substantially reduce the amount of cash flow needed to carry the mortgage on a monthly basis.
- Increase the amortization period of the mortgage loan. Legally lenders can offer up to a 40 year amortization in Canada, so there are some lenders that can lower your monthly payment by increasing the overall loan term.
If you have exhausted all of your options and there just isn’t anyway to keep the home, you have to start considering how to sell. If you do find yourself in this position, it’s absolutely crucial to be proactive about it, as a private sale will almost certainly net more proceeds, than if you wait to default on payments and find your property under power of sale. Banks and lenders are not in the business of selling assets, and if you lose control of the selling process, this can make an already bad situation, even worse. It’s not a position I hope anyone finds themselves in, but if you do, get a good agent to help strategize on how to maximize the sale price of your home and where you can downsize, to make this transition as smooth as possible.
Do you need to sell your home? Here are some posts you might find helpful:
- Should I Price My Home Below Market Value?
- What’s Negotiable When Selling Your Home in Ontario?
- Can You Sell a Condo with a Special Assessment?
The Reality
Ultimately, I find that most clients who tell me they can’t afford a mortgage, tend to mean they can’t actually afford the mortgage for the house they want.. rather than that they can’t afford a mortgage at all. This is true at almost every price point, and it’s often comforting for many to hear that all buyers are working to stretch their budget to meet their desired criteria, despite their budget. Whether you’re a first time home buyer looking for an entry level condo, a move up buyer looking for that dream semi detached, or a more established family looking for the larger detached in a coveted school district, almost everyone without unlimited resources is making a trade off somewhere.
So to the point I made earlier, in a highly competitive market like Toronto, not everyone is going to be able to afford the home the want… certainly not right away. This doesn’t mean that you can’t afford a home at all though, or that it’s not worth looking for greener pasture where your budget can actually get you what you’re looking for. I’ve had more then a few clients look further north, east, or west of the core and successfully secure their dream home.
This sort or change can be hard to think about at first, but when you look at what you can get a short distance away from the core, the change in your lifestyle especially when you have a family, is often well worth the transition. So if you’re looking for more ways to get creative in this market, and strategize about how to afford the home you really want; we’ll get you there!
Looking for more real estate advice? Get in touch today by calling 416.642.2660 or email admin@torontorealtygroup.com.
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