Housing affordability in the GTA is close to the worst it’s ever been.
According to the RBC Housing Trends and Affordability report, a household in Toronto would need 66% of its income to cover housing-related expenses. And the difficulties continue whether you’re looking to own a home or rent.
- First-time homebuyers have to pay a higher cost to get into the housing market in the first place. Even relatively more affordable options, like condos, have gone up in price recently.
- Renters are paying more in rent. According to RBC, rental rates in Toronto have gone up 4.4% in the past three years.
- Even GTA residents who already own a home may be struggling as housing costs go up or if they are scheduled for mortgage renewal.
Whether you’re a renter, shopping for your first home, or a homeowner, the housing affordability crisis likely isn’t going away anytime soon – but there are solutions to be found in your own pocket.
These money-saving tips can help you put more into your housing budget, save for a down payment, or pay off debt that may be affecting your ability to get a mortgage.
Here’s what we recommend:
- Get a roommate.
If you are currently renting, you may already have a roommate. But if you don’t, finding one can be a good way to save on costs – especially if you are hoping to save up to buy a house.
If your rent is $2,000 per month and you split that in half with a roommate, you’d be saving $1,000 each month – or $12,000 each year.
Even current homeowners may benefit from having a roommate to share housing costs or looking into co-ownership, where two or three friends buy a house together. While you may have less privacy, you’ll be able to afford more home.
- Negotiate your lease or mortgage renewal.
For tenants, you may be able to work out a deal with your landlord. If you’ve been a good tenant and have a history of paying your rent on time and in full, your landlord may be keen to keep you. You might be able to negotiate a break on rent for your good behaviour, or for doing something extra in the complex – like shovelling the driveway in the winter.
For homeowners, when time comes for your mortgage renewal, ask your broker or lender if there is a way to save on your rate. You might benefit from a lower rate or by switching to a fixed-rate mortgage vs. variable-rate. If your renewal has already passed, consider looking into mortgage refinancing instead.
- Look for savings in your other bills.
Like it or not, 66% doesn’t leave much room for other expenses. But if you can’t reduce the 66% any further, you may be able to cut back on the 34%.
Look at all of your bills – not just the housing-related ones – with a fine-toothed comb. Do you need a subscription to HBO Go and Netflix? Are you paying for services you no longer use? Can you switch from brand-name groceries to generic? Are you paying pricy service fees for your bank account? Can you walk or bike in the summer instead of taking the TTC?
While these potential savings may be relatively small, they can really add up. And if your goal is to own property in the next few years, they might be what makes the difference in down payment or shortens the homeownership timeline. It’s all about priorities.
- Focus on paying down debt.
Debt is bad for your budget in two ways. First, having more debt means more payments each month. If you have $9,000 in credit card debt, for example, and are always making the minimum payment, you’re going to be paying it off for a very long time as interest adds up. And that money could be going to other things in your budget – like your mortgage or savings for a down payment.
But the second reason that debt can hurt housing affordability has to do with lender regulations. Federally-regulated lenders in Canada (the big banks) have to assess your current debt levels when you go to them for a mortgage or refinancing. If you have too much housing-related debt (known as the Gross Debt Service ratio – or GDS) or too much total debt (known as the Total Debt Service ratio – or TDS) you’re going to have a much harder time getting a mortgage – if you can get one at all.
Paying down your high-interest debt like credit card bills, a line of credit, student loans, etc. quickly is in your best interest, both to save more money and to improve your chances of getting a mortgage or a better rate on renewal.
You might consider:
- A debt consolidation loan, like the ones offered by DebtCare Canada.
- If there is a lot of debt, filing for a consumer proposal or for bankruptcy.
The housing affordability crisis in the GTA is making it difficult for renters, house hunters, and homeowners alike – but there are savings to be found.
At DebtCare Canada, we offer financial help to people with all types of credit and income. Ask us today about our debt relief program or our loans and mortgages.
Call 1-888-890-0888 or visit www.debtcare.ca.
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