There is no question it is getting more expensive to live in most major cities. How much do you need to earn to own a home across Canada?
Market Update – March 2016.
The average Canadian home is now worth more than $500,000 for the first time ever.
Monthly sales data from the Canadian Real Estate Association released Tuesday show the average price of a Canadian home was $503,057 in February 2016. That’s an increase of more than 16 per cent from the same month a year ago.
How much do you need to earn to own a home across Canada?
From a lenders perspective qualifying for a mortgage to buy a home is the same, regardless of location. There are debt servicing guidelines you must meet in order to secure mortgage financing. In simple terms, your maximum percentage of debt for a mortgage payment (principal, interest and property taxes) should not exceed 32%. So if you earn $10,000 each month the maximum mortgage payment should be $3200. In addition your maximum percentage of debt for a mortgage payment AND other debt payments such as an auto loan, student loan, credit cards and lines of credit should not exceed 40% of your income. In the above example if you earn $10,000 your maximum total debt payments would be $4000 per month. These ratios have some flexibility based on the lender specific guidelines and dependent on the credit score. However, these are good guidelines to remember when trying to estimate how much you can afford before you shop for a property.
In high priced markets such as Vancouver many home buyers consider rental income from a suite in the property to add value to their purchase. The lender will consider the suite income to support the overall income and help qualify for the mortgage. The demand for homes with suite income has risen greatly as house prices have increased and buyers need the additional income to afford a home.
Higher debt on credit cards and outstanding auto or student loans are also a factor in affordability. Those monthly payments are calculated into the total debt servicing. In some cases a home buyer can qualify for the monthly mortgage payment BUT other monthly debt payments are too high for the buyer to qualify. Managing debt load is important and especially when you are ready to make the purchase of a home or even an investment property.
How much do you need to earn to buy a home across Canada—- click below.
http://www.vancitybuzz.com/2015/01/much-need-earn-buy-house-across-canada/