Several months ago I made a video giving a tour of my Toronto condo. While I expected the video to do well on social, I never expected it get over 6,000 views and counting. But with Toronto’s real estate market making it nearly impossible for millennials to own a home, it’s not surprising that so many want to know ‘what does a Toronto condo REALLY look like?’
Because home ownership is a challenging goal for millennials, I wanted to share my ‘first home’ story in hopes of letting others know that it IS POSSIBLE to own a home. To tell my story I’ve partnered with Meridian, Ontario’s largest credit union.
I’ve dreamed of living in the city since I was a little girl. And while I began saving for my first home at age 20, I quickly came to realize that saving my income wasn’t enough. By the time I was 27 we needed a minimum of $140K to enter the market. It seemed that every year we tried to get into the market a reality check got us to back out.
Our search for a home first began in 2014. We were approved for a purchase between $450K to $650K. A healthy budget considering Toronto real estate was modest at the time. But as I continued speaking with my Meridian mortgage advisor she brought up scenarios that gave us yet another reality check.
We had never thought about budgeting in case one of us (the higher earner) lost a job. We didn’t consider how the additional costs—condo fees or taxes—could affect our monthly payments. And we didn’t think about how being ‘mortgage poor’ could lead to a stress we had never experienced. Instead of pushing us to buy, she suggested we re-evaluate our lifestyle and try to build more of a savings. After all, I was a 24-year-old dreaming of owning my own business, a goal that didn’t fit in with home ownership.
So we took a step back yet again, and started to save once more. It was one of the best, yet challenging decisions we made. In 2016 we purchased our first home, a pre-build condo located in the heart of the St.Lawrence neighbourhood. Here is how we did it:
We tracked every penny (literally down to the cent)
For the longest time I couldn’t understand how we couldn’t save enough to buy a home in the city. Our combined income was over the average Toronto household income and yet home ownership was out of reach.
To help me understand why this was happening I had to track exactly how much we made and exactly how much we spent. I spent a year tracking everything down to the last cent. I brought my calculator when we would go grocery shopping, saved every receipt and made monthly savings goals. We also went through our bills and talked about things we could eliminate (ie. the $300 cable/ sports package for a T.V. I never watched).
Everything was placed into a spreadsheet. My ‘Master Budget’ document that I would check weekly.
Believe me when I say once you know where your money goes, you can make smarter decisions. We went from saving $18,000 in one year to saving $70,000 in one year.
We based our life on Needs vs. Wants
Once I understood how we spent our money, I started to cut things out. No more extravagant grocery runs, no miscellaneous purchases and and no more avocado toast (yes, we were that couple). If we forgot a lunch for work, too bad. If we didn’t feel like eating the veggie soup in the fridge after a long work week, too bad.
We lived on a strict needs vs. wants rule. Our extra ‘spending budget’ per month was almost non-existent. We needed to decide: do we want to own a home or do we want to enjoy ourselves in the city? Unfortunately, in this market, we couldn’t have both.
We moved into a smaller condo, bringing our monthly living costs down by $500 a month.
Next, we went through all of our valuables (electronics mainly) and began selling anything we didn’t need. Good bye to the iPads we never used, the speaker system we didn’t listen to, the T.V. we didn’t watch, the old camera lens and any designer clothing I wasn’t wearing. We made an extra $4,000 from selling things we didn’t need and you better believe most of that went into our savings.
We also looked at ways we could capitalize on our savings. All of our savings went right into a High Interest Savings Account with Meridian which helped our money build interest.
We purchased a pre-build property
There are three reasons why people buy into pre-build: It’s cheaper, it will only rise in value and you don’t have to pay a mortgage until you move in.
We chose to buy pre-build because it was a great way to lock in a two bed, two bath condo with a parking spot downtown. The wait time for the property to be built enabled us to save more money, paying more upfront. This gave us the comfort of knowing that when we buy a mortgage, regardless of a rate hike, we wouldn’t feel stressed. For us, it was the right option.
This being said, you must seek advice from a realtor or your mortgage advisor before investing in a pre-build property. There are assignment clauses that could have you ‘stuck’ with the property and paying a high fee if you want to sell. There are levy fees that jack up prices. And there are builders who might have you in the dust. (Cue the Toronto Life horror story).
We chose to run a marathon, not a sprint
I am a millennial. I am under 30. And home buying was a challenge. I am not alone.
When I log onto Facebook I continually see my peers discussing the challenges they have trying to get into the market. The pain and stress that millennials feel is real. This is why it’s so important to remember that home buying is a marathon that takes time. It will take years to accumulate your down payment and a lot of financial planning. It will take years because BUYING A HOME IS NOT EASY. It is one the biggest financial decisions of our lives. But with determination, long-term planning and the right advice, it is possible.
If you want to get into the market, I highly recommend talking to an expert to develop a plan. Meridian offers a variety of services to help you with the home buying journey, and experts who can assist with budgeting. Talk to an advisor or click here to learn about Meridian’s mortgage rates.
Disclosure: This video was made in partnership with Meridian credit union. That being said, I have been a long time Member of Meridian (since 2014) and all of my thoughts are true.
Feature Image by: Dick Winters @scarbviews