29 November 2017 0 Comments Posted By : Administrator

Canadian Real Estate Is Pricey, Here’s How Much You Have To Earn To Buy A Home

Vancouver and Toronto real estate is well out of the reach of many, but is that the case around the country? Numbers from the Canadian Real Estate Association (CREA) show a huge variance on the cost of a typical home across Canada. We wanted to see what this variance means for incomes. So we crunched some numbers, like we always do. Here’s how much you need to earn in order to carry a mortgage in Canada’s largest cities.

About The Calculations

The terms you’re going to need to understand are benchmark composite homes, gross incomes, conventional mortgages, and stress tested rates. A composite home is the price of a typical home using all home types, for the specified city. Gross income is the before tax income required to carry the payments on a mortgage for these homes. The mortgages we’re going to use are conventional, which means there’s at least 20% down. We did use a 30 year amortization, which means your payments are spread over 30 years. The mortgage rate we’re using is the stress tested mortgage rate, which is 4.99%. The last one seems high for what you’ll pay today, but you’ll have to qualify at that rate starting January 1, 2018 – so let’s just get used to it today. We’re also going to assume that you have decent credit, and few other bills in your life.

You Need A Household Income of Up To $157,000

Buying a house isn’t easy anywhere in Canada, but Toronto and most of Lower Mainland, BC is even harder. To buy a home in the CREA aggregate of urban centres, your household will now need to earn at least $95,000 to afford the payments on a typical home. Vancouver is the king of unaffordability, requiring a household income of $157,000 to carry the payments. Fraser Valley (BC), and Toronto both require a household income of $115,000. Yes, it’s just as expensive to buy in a relatively suburban area of BC, as it is to buy in Canada’s largest city.

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