How Much Earning Is Required To Buy A Home in Canada
The topic of our blog is often a question on the minds of many - newcomers to the country as well as students or those who have just got their first-ever jobs and dream of buying a home someday. In 2022, when mortgage rates have gone up along with the stress test rate, prices of homes have come down, at least in major cities. But what you need to earn to afford these homes has gone up quite a bit. The reason is the higher stress tests due to increased mortgage rates.
Factors to consider while calculating
When you are on a mission to buy your own home in Canada you need to keep two things in mind: your household income and the down payment. You can arrive at the household income by adding up your gross salary with that of your partner in case both of you are buying the house together. You will need the household income to calculate the amount you can afford to pay towards a mortgage payment every month.
Besides, you would also need to make a down payment in order to buy the home. It is anywhere between 5% and 20% of your house cost. Pro Tip: While a minimum of 5% down payment is compulsory, it is advisable to pay a larger sum towards the down payment if it is possible within your means.
Unless home prices become low, the effect of stress tests will have to be borne by those wanting to purchase their homes.
How much does buying a home cost
House prices fluctuate a lot from time to time, especially in certain cities, so whatever data you may see online would keep changing. In any case, you shall be able to find cheaper and even more expensive homes than the known average prices. So unless your house-buying timing coincides with any such available lists you may need to consult housing brokers for a peek at the current price of houses in the area you are interested in calling home.
What is an 'affordable' house?
You can arrive at the 'affordability' of any house through your income as the base measure. To arrive at the affordability of a house you need to see that your monthly income can cover not only the utility costs, monthly mortgage payments, and property tax but also any other payments you may have to make such as car mortgage, credit card payments, student loans, etc. These should also be considered to arrive at the mortgage sum you qualify for.
Something new homeowners may not take into account is that paying the monthly mortgage is not the end of the story. You also have to set funds aside for maintenance and repair of the home which is between 1% and 3% of the home value per year. You could even use some mortgage affordability calculators available online to arrive at a figure which is right for you.
If you need any help or support about buying a home or applying for a mortgage in Canada, do write to us at LendX Financial in Brampton, Greater Toronto Area.