Hi Jo,

I'm currently renting and I have a really well paying job, but I only have $5,000 saved up - can I afford to buy a condo? If so, how and what can I afford?

Jess, Toronto

Hi Jess,

With $5,000 available, to be honest, there isn't much you can afford in today's market with average prices for condos hovering in the mid $200K range.  However, if you do find something that suits your budget, it looks as though you'll be in the high-ratio mortgage zone.  A high ratio mortgage is essentially any mortgage in which you put down less than 25% of the purchase price of a home - these types of mortgages are very popular in today's market these days as you can imagine because it opens up the world of home ownership to people like yourself, who have well paying jobs but don't have that much moola saved up. There is a catch though - with high ratio mortgages, you have to pay a premium which is calculated as follows:

The maximum loan amount is 95% of the property value. The mortgage insurance premium, a one time fee, can either be paid in full when the loan is disbursed, or amortized over the life of the loan and included with each mortgage payment (ie. if you borrow $100,000 the CMHC cost is $2,750 at 5% down which you can pay in a lump sum or add it to your mortage for a total mortgage of $102,750) .

Back to your situation, when you factor in closing costs (land transfer tax, moving, adjustments, lawyers fees, etc.), you might even have to venture into the 0% down arena, which is a good option to get you into the market, but it will cost you.   Banks do offer 0% down mortgages in which you essentially borrow the 5% from them, but the real kicker is that you have to pay the bank's posted mortgage rates -- which is usually 1.0% (give or take) higher than a discounted rate that you get if you put down a minimum of 5% down.  So the bottom line is, start stuffing your piggy bank to save more to make the minimum 5% down or get ready to get your toosh smacked by the bank with high interest costs.

If you want more information, email me at joanna@thinktorontohomes.com