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Tips on moving up the house ladder

200 276 Nisha Muire
If you are like most Toronto homeowners, at one point you will likely find yourself thinking about moving to a large home. However, given the current high price of real estate in the GTA, this is easier said than done. It is understandable for people to wonder how they will ever be able to climb the house ladder if they don’t earn enough to finance the large deposits. There is a simple way of moving up this seemingly unscalable climb if you are on the outside – the trick is to simply get in the door. Really.
As long as you are able to put together the deposit for your first home, then the rest will be easier. Once you have one property, you can use the appreciation value in that home towards financing a larger one.
For instance: if you purchase a condo for $200,000 and you put a $40,000 deposit on it your mortgage is $160,000. In a few years the condo will appreciate in value to about $320,000. Assuming that you have paid toward your mortgage you should have reduced your mortgage to about $145,000 and you should realize a gain about about $160,000 after closing costs (realtor, notary, moving charges, etc…) . The $160,000 can now be used as a 25% deposit on a home worth $600,000 or a 35% deposit on a home worth $450,000 – both values purchase you a much bigger place than the initial condo you started out with.
By trading up every few years, you can realize your dreams of larger home ownership regardless of what you start out with. Assuming that your salary will rise as your work experience and careers grow, sustaining a larger home will become easier. On the other hand, if you are happy in a smaller place, then you can use the profit from your sale to buy something in a less expensive, up-and-coming area, thereby further reducing your mortgage.
Regardless of how you play the game, real estate investment is usually a solid financial vehicle.


Nisha Muire

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