Adequate Income for Homeownership in Toronto and the Greater Toronto Area.
In order to determine what it takes to purchase a home within Toronto and the Greater Toronto Area (GTA), let's examine the income level that you or your household will require based on the benchmark home prices released by the Toronto Regional Real Estate Board (TRREB) in August of 2022. This information will help you to assess whether your current or projected income is adequate for your desired type of property.
To begin, let's analyze the income required for home buyers across the entire GTA by property type. The income level varies depending on the type of property you wish to purchase. For example, a single-family detached home priced at $1,414,000 will require a household income of $280,000, amounting to a monthly mortgage payment of ,741. Alternatively, a single-family attached home priced at $1,079,000 will require a household income of $214,000, resulting in a monthly mortgage payment of $5,144. A townhouse priced at 8,300 will require a household income of $167,000, leading to a monthly payment of $3,996. Lastly, an apartment/condo priced at 9,000 will require a household income of $148,000, leading to a monthly payment of $3,523.
It is evident that you will require a high household income to afford any type of home within the GTA. In Canada, the average income in 2020 was $51,300, and the median net income of families and individuals living alone was ,800. This means that you would need more than four times the median income to qualify for a mortgage on a detached home in the GTA.
Moreover, we also examined the incomes required for the average property in each city within the GTA, taking into account the benchmark home price for detached and attached houses, townhouses, and apartments/condos. Consider the following: A home in Ajax with a benchmark price of $1,042,900 will require a household income of $207,000, amounting to a monthly mortgage payment of $4,972. A home in Aurora priced at $1,346,700 will require a household income of $267,000, leading to a monthly payment of ,420. Finally, a home in Brampton priced at $1,051,900 will require a household income of $ pending.
The cost of real estate in various Canadian cities has undergone a significant shift since the Bank of Canada raised its benchmark interest rates beginning in March 2022. Though there has been a consistent decline in real estate prices, this has not translated to a noteworthy enhancement in mortgage affordability. Specific details of these shifts in cost can be found below for each city.
Burlington had an original average home price of 4,400; however, after the rate hikes, the cost decreased to 7,400, which is a difference of $267,000. Despite this decline, mortgage rates did not enhance and remained at $4,741.
In Halton Hills, real estate showed a sharper decline, with an original average home price of $1,120,800 decreasing to 1,600, a difference of $319,200. The mortgage rate remained consistent at $5,343.
A similar trend was noted in Stouffville. An original average home price of $1,394,200 decreased to $1,094,460, a significant difference of $299,740. The mortgage rate did not show a change and remained at ,647.
Overall, the Canadian market has faced notable shifts in real estate pricing; however, mortgage affordability remained resolutely static during this period.
Despite the drop in home prices, higher interest rates have made it difficult for new home buyers to borrow the necessary funds for their mortgage. This means that for potential home buyers to feasibly purchase property in Toronto or the GTA, home prices will need to fall even lower.
Calculating how much income is needed to secure a mortgage involves evaluation by a mortgage professional. The process scrutinizes your finances and begins by analyzing your gross debt service (GDS) ratio. Your GDS ratio is determined by tallying up all housing expenses each month which include mortgage payments, utilities, and taxes. Afterwards, this sum is divided by your household income, then multiplied by 100. If your GDS ratio equates to 39% or less, the home you're aiming to purchase should be within your budget according to Canada Housing and Mortgage Corporation. However, some lenders stipulate a lower GDS ratio limit. As a guideline, the Financial Consumer of Canada Agency suggests a GDS of 32%.
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