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Our new down payment tool shows just how brutal it is out there for home-buying millennials

What we are asking our young people to do in order to afford a home is cruel and unusual.

Buying a home in some cities now requires that you save frantically for as much as a decade or more. This is the message delivered by the new Globe and Mail Down Payment Tool, which was developed by my colleagues Chris Manza, Matt Lundy and me. Saving for a home down payment is brutal if you live in not only Toronto and Vancouver, but some nearby cities as well.

Click here to use the Down Payment Tool

We launched the tool last week and within minutes had people commenting via social media about how bummed out they were by the numbers. Eleven years, 20 years, 48 years. Never. This is how long people told us it will take them to afford a home. Is ownership so important that people put themselves through this?

I vote no, but that puts me in the minority. So let's use the down payment tool to see what housing true believers are up against.

One thing we should address straight off the top is that low interest rates are the biggest challenge for people saving for a down payment. Low rates make today's housing market craziness possible by holding mortgage costs at historic lows. But the flip side is the minuscule return on the high-rate savings accounts that are the smart choice for building down payment funds (no stocks – they're too risky in the short term).

We used a default interest rate of 0.8 per cent, but you may be able to get more elsewhere. If you do see a higher rate, make sure you can get it on a tax-free savings account and not just a regular savings account. TFSAs are ideal for down payment funds because you don't lose any of your tiny gains to tax and the money is readily accessible in case you find yourself buying a house on the spur of the moment.

We set up the down payment tool to show how quickly people can buy a home with the minimum down payment. There's also an option to see how long it takes to build a down payment of 20 per cent, which is enough to avoid having to pay a premium for mortgage default insurance. If you go for the minimum down payment, your timing on getting into the market is mostly a function of how much you can save each month.

At $500 a month, you could go from zero to the minimum down payment for the average priced Toronto dwelling (houses plus townhomes and condos) in a little over six years and the average Vancouver dwelling in almost 11 years (assumes 0.8-per-cent returns on your savings). But how feasible is this kind of commitment?

Let's assume someone in Toronto makes $45,000 gross and $37,000 after taxes and deductions. Rent at $1,000 per month reduces net pay by $12,000, and basic living and public transportation expenses plus smartphone and utilities take off another $600 per month, or $7,200 annually. Add another $6,000 annually to cover $500 in monthly savings and we're left with $11,800 annually, or $983 per month ($227 weekly) to cover the cost of socializing, dating, travel, car ownership and upkeep, clothes, student debt repayment, gifts for friends and family and dental and prescription costs (for those who don't have benefits at work).

Six years of that lifestyle gets you into a Toronto home at today's prices. If you want to factor in higher prices ahead, just increase the latest figure. A 20-per-cent bump to the average Toronto price pushes the time needed to build a down payment to almost 8.5 years, based on $500 monthly contributions to savings.

All of this gets you a minimum down payment, which means ginormous monthly mortgage costs of about $2,750 based on Toronto's average sale price and a 2.5-per-cent, five-year fixed-rate mortgage.

These are the affordability fundamentals that should have millennials questioning their desire to buy a house right now in expensive cities. Alternatives: Buy a condo, rent or look at cheaper cities.

Starting from scratch and saving just $400 per month, you'd get to the minimum down payment in just less than two years in Winnipeg, in about 2.5 years in Montreal or Halifax, in a little less than three years in Ottawa, in 3.5 years in Edmonton and in four years in Calgary. Not all housing markets eat the young.

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