Since really starting to get serious about my finances in 2022, I’ve been looking at the feasibility of purchasing property in Toronto.
Welp, once I do the math, the answer to “Can I afford to buy?” is glaringly obvious.
Let’s look at some simple math with the big ol’ caveat that this is back-of-the-napkin math. I’m using current averages, approximations, and values from various online calculators to reveal general trends and patterns and I’m not obsessing over minute financial details. I’m looking for the general affordability of the various scenarios available to me.
Average condo price in Toronto as of Feb 2024: $700,000 (Source) while the average detached house price in Toronto is $1.2M as of Feb 2024 (Source).
The TD Mortage Affordability Calculator tells me I can afford a property of $334,000 on my income (this is me by myself, not splitting with a partner). This is assuming a $20K down payment right now, which is basically what I can afford at the moment, even though I know that down payments should technically be at least 20%. I chose the condo option within the calculator, since this is realstically the only type of property I might have a shot at affording.
The calculator has spoken. It reveals this scenario would amount to a $2,110 monthly mortgage, and they assume that I’d need to pay an extra $700 per month for other housing costs like maintenance and condo fees, property taxes, etc. That leaves me with $1,641 per month for all other life expenses.
Obvious Problem #1 is that condos are basically double what I can afford according to this calculator, and Obvious Problem #2 is that even if I could buy a condo for $334K in Toronto, I’m not sure I would want to given that my monthly cost for housing would shoot up to about $2,000 more per month. (I currently pay $750 for rent in my 2-bedroom apartment, which I split with my partner, who also pays $750.)
Let’s try a second experiment, which is a bit more realistic to my personal situation. Let’s assume my partner and I are buying a property together as a couple. I plugged in a $200K downpayment (for the sake of this experiment let’s say we get lucky and are gifted the down payment). This time, the calculator says we *might* be approved for $832,000, but it recommends a scenario for $792,000.
At $792,000 (after a $200,000 down payment), the mortage would come to at least $3,820 per month, plus added housing expenses of $1,650 per month. Our remaining cash every month would be $2,353 (or $1,176 each). That’s money for everything else in life: phone, internet, food, eating out, health/disability insurance, entertainment, gifts, furniture, travel, professional development, tech, and arguably one of the most important of all: saving for retirement!
Pushing things to the absolute limit, I *might* be able to invest $400 per month into retirement savings under this scenario. For me, that’s just not enough financial security. I want to have at least $1.5 million in retirement savings by the time I’m 67. Because of this, I’ll be prioritizing my retirement over rushing to buy a home unless my income or market conditions change considertably over the next 5-10 years.
