It depends on the price of the property you are looking at.
In Toronto, to comfortably pay all the fees associated with a $1 million house, you would need about $200,000 of income per year. This means a monthly income of around CAD $17,000 per month (in the case of a couple, you need around CAD $ 9,000 per month).
If you are looking for a “very small” condo, then $75,000 per year would be a decent yearly income. However, it might still be a stretch.
If you are looking to buy a home, it would be better to save aggressively, while also looking to purchase in areas outside of the city. If you are willing to commute, it would be better to look at houses in the extended greater Toronto area.
Why are houses getting more expensive in Ontario?
Ontario is a province of Canada, which is the most populous in the country. This is mainly due to the increase in immigrants in the last few years.
If you are wondering if it is the same reason why there has been a rise in the housing rate, then you are wrong.
The main reason behind this is that there are not enough homes being built in Ontario to accommodate the growing demand. This has led to an increase in prices and a decrease in affordability for many people.
The greenbelt prevents new developments from occurring, which means housing becomes scarce and expensive. With all the developments that are being restricted, there are more people looking for affordable homes outside of the GTA.
Requirements for Mortgage Qualification
- Homebuyers will need at least a credit score of 680. This is 80 points higher than the previous requirement of 600. If a couple is buying a home, one of the applicants must have a credit score of at least 680.
- The maximum gross debt ratio (GDS) is limited to 35% (down from 39%), and the maximum total debt service ratio (TDS) is now 42% (down from 44%).
Effectively, you will need to show that a smaller percentage of your income is required to pay off your debts.
- If you borrow money to make a down payment or build equity, your mortgage default insurance will no longer be considered.
Find Out Your Downpayment Amount
A typical house in Toronto or Vancouver may cost 1.5 or 1.8 million dollars, and all homes over one million dollars require a 20% down payment, so that means 200k – 300k for a down payment, which is not exactly a small sum of money!
A 5% downpayment is required for purchases up to $499,999.
A 10% down payment is required for purchases up to $999,999.
A minimum downpayment of 20% is required for purchases of more than $1,000,000
When the purchase price exceeds $1 million, the down payment is increased to 20%. So a down payment of $75k is required for a $999,999 house, but if it costs $1 more, the down payment increases to $200k.
In addition to the down payment, with a combined salary of less than $200,000. You’d never be able to qualify for that 1.5 or 1.8 million dollar home. To increase your qualifying amount, you must save more than 20% of your income.
The downpayment is only the beginning. You still have to pay for hydro, gas, water utilities, property taxes, insurance, furnishings, appliances, routine maintenance, yard tools like lawnmowers, rakes, spades, fertilizer, and so on once you move in. The list could go on and on. Add another 30% to your monthly mortgage payment to cover the “hidden costs” of homeownership.
What about the monthly mortgage payment?
Your monthly mortgage payment will depend on your principal amount.
Mortgage principal is the amount borrowed from the lender less the amounts repaid to the lender and applied to principal reduction. The mortgage principal is reduced as monthly mortgage payments are made.
For example, let’s say David has a $200,000 mortgage with a 5% interest rate and a 30-year repayment period. $1067.38 will be the monthly payment. The first payment of $824.78 will be used to pay the interest that accrued during the first month of the loan. The remaining $242.60 will be applied to the principal balance of the mortgage. The principal balance will be $199,757.40. The mortgage principal was $200,000 at the start of the mortgage, and after the first payment is made, the mortgage principal is reduced to $199,757.40.
First-time homebuyers in Ontario
Many people overlook the significant cost of land transfer tax when purchasing a home. The land transfer tax is almost always the most expensive part of your closing costs. However, if you are a first-time homebuyer, you may be in luck because certain provinces, such as Ontario, Quebec, British Columbia, and Prince Edward Island, offer rebates to help you save money on the purchase of your first home.
Read more: 7 tips for buying a house in Canada for dummies
Affordable housing options
Windsor
Windsor’s real estate market is booming.
In January, the average price of a home in Windsor-Essex was $492,480, a 31.4 percent increase over the same month last year. And yet, according to the Canadian Real Estate Association, that price tag is still less than the average January prices in the London area ($607,431), Hamilton-Burlington area ($787,840), or Toronto area ($967,885).
Kitchener
Kitchener is about an hour and 15 minutes away from Toronto, and it offers a perfect work-life balance. You’ll find everything you need here with regards to employment and recreation.
The cost of living in Kitchener is low, and the average income per person is $48,000. The median household income is $86,000. Housing in Kitchener can be affordable if you are looking for a condo or townhouse.
Thunder Bay
Thunder Bay’s housing market offers a great environment for those who want to live close to work, but don’t want to spend a lot of money on rent or mortgage. The city has a low cost of living and a lot of cheap housing options.
We use “shelter costs” as an indicator to investigate housing affordability. All mortgage/rent/condo fees, as well as property taxes and utilities, such as heat and electricity, are included in housing costs. With all of these costs taken into account, the average Thunder Bay homeowner saved $423 per month in 2015, compared to the provincial median. That’s $5,076 per year, or $7,440 less than the average Toronto homeowner.
A similar difference was found in the 2011 National Household Survey, and if it held true for the years in between, the average Thunder Bay homeowner could have saved up to $25,000 on their home when compared to their provincial counterpart. When it comes to renting, the price difference is much closer, but the median renter in Thunder Bay still paid less than 70% of the median renter in Toronto.
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