Joe Rea knows just how expensive life can be these days.

The broker for By Jesse and Joe Realtor Group under Royal LePage Premium One Realty sees many of his clients selling their homes just to get out of debt and stay above water.

Joe ReaAt the same time, he says a lot of his first-time home buyers in their 30s underestimate the real costs of living.

As someone who wishes they taught “How to Support Yourself” in school, he’s the ideal realtor to weigh in on this week’s question.

Should you devote all your savings to a down payment?

You definitely should not, but people don’t realize — especially first-time buyers — that there are associated additional costs that people to take into consideration, especially on closing. In Toronto particularly, we have a double land transfer tax.

In Ontario, you have the Provincial Land Transfer Tax, which is calculated based on the actual purchase price and is a tax on transferring a title from one party to the next party, but in Toronto you pay double.

READ: Real Estate For Millennials: The (Un)Official Guide To Getting Your First Home

For example, A $500,000 purchase for a one-bedroom condo has a $6,500 Provincial Land Transfer Tax attached to it. Plus, because you’re in Toronto, you pay double, so it’s essentially $13,000 that you have to set aside for your condo’s closing date. On top of that, you’ll need money for lawyer fees, so that’s at least another $2,500. So, on a $500,000 purchase, a buyer can expect to need an additional $15,000 on the side. In addition, they might have to buy furniture, appliances and window coverings. By the time the dust settles, you could easily anticipate having to spend $20,000 more. A lot of times, people don’t take that into consideration.

READ: Buyers: How To Maximize Your Down Payment Savings

You should never dump all your savings into a down payment because there are incidentals that always come up where you’ll need more money. But that being said, sometimes you're almost forced to put all your savings down and the system is set up that way, especially with pre-construction.

Builders are asking for a 20 per cent down payment just to buy something. Whereas, before you could buy something with five or ten per cent down and the builders used to take money out of their own pockets to fund the project. Now, those building costs are passed on to the buyer. It has changed quite a bit and I really feel bad for the first-time buyer. These days it’s hard to get into the market unless you want to live an hour or two away from the city.

READ: More Homeowners Lured Away From Big Cities Due To Low House Prices

I don’t think you should put all your money into a down payment because things come up. The car breaks down, the heater breaks and you never know when you’ll need money. Unfortunately, the system is set up to force people into putting every dollar into buying a home and hoping nothing bad happens. The problem is, as people are sitting on the sidelines saying, “I just want to save another $10,000 or $20,000,” the price of the home they want to buy has gone up. It’s an unwinnable race because you never see the finish line.

What I’m finding now when it comes to all my clients under 30, mom and dad — who were able to buy houses in the ‘70s, ‘80s and ‘90s and are now sitting on a property that has doubled in value — are now refinancing their home to get their son or daughter that down payment so they can enter the market.

In the end, if you can enter the market, in addition to at least $20,000 for closing costs, lawyer fees and incidentals, I tell all my clients to try and save at least six months of mortgage payments because you never know what might happen.

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