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Column #1: If you Google "homes
in Canada under $100,000", you will find quite a few. Remember to add
closing costs, land transfer taxes and GST if they apply, otherwise you
will have less down payment than you think. Check your local market
area. Column #2: If you have to get a
mortgage of greater than 80% of the sale price, then you pay
considerably more for insurance premiums and risk fees. Your lender may
require 25% down instead of only 20% to qualify for a "conventional
mortgage". Check your local market area. Column #3: These are your monthly
payments for a 5 year fixed rate mortgage as of
January 2010 at
5.39%
per annum, amortized over 25 years, calculated semi-annual not in
advance. Column #4: These are your
possible monthly payments if you add your property taxes and insurance
to your mortgage payment. I have used a 10% addition which may be too
much or too little. Lenders will also want to include Strata Fees,
Utilities and and additional Debt Payments to your total monthly payment
calculation. Check your local market area. Column #5: This is your gross
(pre-tax) monthly "household" income required before a lender will
approve your mortgage using a Total Debt Service Ratio (TDSR) of 36%. CMHC
states that the Debt Service Ratio among lenders, ranges between 32% and
40% depending on what expenses are used in their formulae. CMHC has
other useful mortgage information here:
http://www.cmhc-schl.gc.ca/en/co/buho/hostst/hostst_002.cfm
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The
Numbered Columns Below Relate to the Numbered Paragraphs Above
Income Required (Column #5) to Get a Fixed
Rate Mortgage
at
5.39% for 5yrs, amortized over 25
years, calculated semi-annual not in advance. |
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#1
Sale Price
Including
Closing Costs |
#2
Conventional
80% Mortgage
No Risk Fees ? |
#3
Monthly Pmts
5yr - 25yr Am
Semi-A at 5.39% |
#4
Monthly Pmts
with 10% added
for Tax & Ins |
#5
Monthly Gross
Income Needed
at 36% TDSR |
|
$50,000 |
$40,000 |
$242 |
$266 |
$739 |
|
$100,000 |
$80,000 |
$484 |
$532 |
$1,479 |
|
$150,000 |
$120,000 |
$726 |
$799 |
$2,218 |
|
$200,000 |
$160,000 |
$968 |
$1,065 |
$2,958 |
|
$250,000 |
$200,000 |
$1,210 |
$1,331 |
$3,697 |
|
$300,000 |
$240,000 |
$1,452 |
$1,597 |
$4,437 |
|
$350,000 |
$280,000 |
$1,694 |
$1,863 |
$5,176 |
|
$400,000 |
$320,000 |
$1,936 |
$2,130 |
$5,916 |
|
$450,000 |
$360,000 |
$2,178 |
$2,396 |
$6,655 |
|
$500,000 |
$400,000 |
$2,420 |
$2,662 |
$7,394 |
|
$550,000 |
$440,000 |
$2,662 |
$2,928 |
$8,134 |
|
$600,000 |
$480,000 |
$2,904 |
$3,194 |
$8,873 |
|
$650,000 |
$520,000 |
$3,146 |
$3,461 |
$9,613 |
|
$700,000 |
$560,000 |
$3,388 |
$3,727 |
$10,352 |
|
$750,000 |
$600,000 |
$3,630 |
$3,993 |
$11,092 |
|
$800,000 |
$640,000 |
$3,872 |
$4,259 |
$11,831 |
|
$850,000 |
$680,000 |
$4,114 |
$4,525 |
$12,571 |
|
$900,000 |
$720,000 |
$4,356 |
$4,792 |
$13,310 |
|
$950,000 |
$760,000 |
$4,598 |
$5,058 |
$14,049 |
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$1,000,000 |
$800,000 |
$4,840 |
$5,324 |
$14,789 |
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Affordability (Next Table) |
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Affordability Ranking of Canadian
Cities
(Least to Most ~ also published as a
jpeg image)
Statistics Canada average
wage tables are here:
http://www40.statcan.gc.ca/l01/cst01/famil106a-eng.htm |
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INTER
Rank
of 272 |
NAT
Rank
of 28 |
Q3 2009
Canadian Cities
Tabled by chpc.biz |
Median
House
Price |
Median
Income
per yr |
Price X
Income |
|
272 |
28 |
Vancouver |
$540,900 |
$58,200 |
9.3 |
|
264 |
27 |
Victoria |
$444,900 |
$56,200 |
7.9 |
|
248 |
26 |
Abbotsford |
$382,200 |
$57,500 |
6.6 |
|
232 |
25 |
Kelowna |
$314,900 |
$53,100 |
5.9 |
|
215 |
24 |
Toronto |
$358,400 |
$68,600 |
5.2 |
|
200 |
23 |
Montreal |
$247,000 |
$50,800 |
4.9 |
|
188 |
22 |
Calgary |
$353,900 |
$76,500 |
4.6 |
|
183 |
21 |
Saskatoon |
$247,600 |
$56,800 |
4.4 |
|
180 |
20 |
Hamilton |
$269,900 |
$64,300 |
4.2 |
|
178 |
19 |
Edmonton |
$286,700 |
$70,300 |
4.1 |
|
171 |
18 |
Peterborough |
$217,000 |
$55,900 |
3.9 |
|
163 |
16 |
Ottawa-Gatineau |
$270,800 |
$70,700 |
3.8 |
|
163 |
16 |
St. Catharine’s-Niagara |
$212,400 |
$56,300 |
3.8 |
|
152 |
15 |
Kingston |
$220,900 |
$59,000 |
3.7 |
|
143 |
13 |
Halifax |
$207,400 |
$57,900 |
3.6 |
|
143 |
13 |
Quebec |
$188,300 |
$52,600 |
3.6 |
|
137 |
12 |
Regina |
$214,600 |
$61,800 |
3.5 |
|
128 |
10 |
Barrie |
$236,100 |
$70,100 |
3.4 |
|
128 |
10 |
Kitchener |
$233,000 |
$67,900 |
3.4 |
|
120 |
9 |
Winnipeg |
$185,700 |
$56,300 |
3.3 |
|
112 |
8 |
London |
$192,700 |
$59,300 |
3.2 |
|
104 |
6 |
St. John's, N |
$183,300 |
$58,200 |
3.1 |
|
104 |
6 |
Sudbury |
$179,500 |
$58,400 |
3.1 |
|
77 |
4 |
Saguenay |
$135,700 |
$49,200 |
2.8 |
|
77 |
4 |
Saint John NB |
$149,600 |
$53,900 |
2.8 |
|
43 |
3 |
Moncton |
$137,800 |
$55,300 |
2.5 |
|
20 |
1 |
Thunder Bay |
$128,200 |
$57,000 |
2.2 |
|
20 |
1 |
Windsor |
$136,900 |
$63,300 |
2.2 |
SOURCE:
http://www.demographia.com/dhi.pdf
This table is sorted with the highest ratio of median housing cost
to median household income at the top showing that Vancouver is the
most unaffordable city in Canada AND the world (out of 272 cities)
requiring a buyer to pay 9.3 times annual income. |
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Get pre-approved for the maximum mortgage you can. Start with
your own bank and then get 2 other quotes. Compare not only
interest rates but closing costs and any 3rd party fees.
Mortgage market rates and fees can fluctuate daily; a good
broker will spot the differences. Here is a table showing
income required to qualify for a
mortgage.
Make sure your mortgage is portable. If you get transferred or
decide to change neighborhoods, most banks allow you to move
your mortgage to a new property without penalty.
Always make your loan and other debt payments on time. Every
delinquent item in a credit record reduces your ability to get
the best (cheapest) loans. Lenders care about only one
thing...the repayment of debt on time.
If a loan payment has to be late, the hierarchy of loans to be
late on are: credit cards, installment loans and mortgages.
Always pay your mortgage first.
Your mortgage loan rate of interest is generally less than any
other type of loan. If you have significant debt outside your
mortgage, get your bank to increase the mortgage at your
renewal date and pay off the higher interest rate loans.
Take advantage of any bank offering that will reduce your debt
quickly. For example, given the choice between one payment per
month (monthly) or half of the payment every other week
(bi-weekly), choose the bi-weekly payments. You will end up
making the equivalent of 13 full payments per year if you are
paying bi-weekly as opposed to 12 with monthly repayments. But
make sure you check that each bi-weekly payment will go towards
reducing your principal and make sure there are no service
fees. Note also that bi-weekly is not the same as bi-monthly.
Bi-weekly results in 13 full payments per year. Bi-monthly
results in only 12.
Most mortgages allow a percentage of the principal to be
repaid in any calendar year beyond your regular payments.
Find out what is allowed and either make the equivalent
payments against the principal each month or as a lump sum
once or twice per year. The faster you reduce the
principal owing, the less interest you will pay.
At every term renewal take any available savings if not
earmarked for something else, and use the savings to pay
down your mortgage principal.
Always choose the shortest amortization rate that you can
afford. If interest rates are lower on a renewal date than
when you originally took out the loan, choose to reduce
the amortization rate rather than the payment amount if
you can afford it.
Reverse Mortgages are not a good choice for elderly
homeowners wanting to extract equity from their property
because reverse mortgages have much higher fees than
conventional loans. A better solution is to get a
conventional mortgage, or a line of credit or sell the
property and downsize into a less expensive or rental
property.
Commercial
mortgages are generally more expensive (more risk) than
residential. Do a thorough
cash flow analysis (free) of the income producing
property before you commit to mortgage terms. For $5 you
can get my real estate
Evaluator Spreadsheet and quickly assess the value of any property. The
strategy of paying down a mortgage quickly may not be as
advantageous in a commercial/revenue property setting as
it is in a residential setting. In Canada,
residential mortgage interest is not deductible against
income.
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