Home prices increasing much faster than wages
A new house affordability study indicates that in the last decade, the amount of income needed to cover housing costs has gone up exponentially.
Findings from a Saskatoon-based real estate search reveals that with home prices growing much faster than wages mortgage affordability has deteriorated in many urban centres despite mortgage rates remaining at record lows.
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- Appraisal Fee: An appraisal fee is an estimate of the value of the home. The bank of credit union may require that the property be appraised at your expense.
- Deposit: A deposit is required to ensure that the buyer is serious about purchasing the home. It can form part of your down payment, but it must be paid when you make the Offer to Purchase.
- Down Payment: you will need a down payment (money paid up front) to obtain a mortgage. With a down payment of 20 per cent or more of the home’s price, you can obtain a conventional mortgage. Your down payment must be at least five per cent of a home’s price for you to benefit from a competitive interest rate.
- Mortgage Loan Insurance Premium: If you have less than 20 per cent down payment your bank or credit union may require that you buy mortgage loan insurance. You can add the mortgage insurance premium to your mortgage or pay the full amount when you close the sale on the house.
- Home Inspection Fee: A home inspection is a report on the condition of your home. You may want to make your inspection a condition of your Offer to Purchase, to make sure you are aware of the condition of the house before you agree to buy.
Other fees to consider:
- Estoppel Certificate Fee
- Land Registration Fee
- Prepaid Property Taxed and/or Utility Bill
- Property insurance
- Survey or Certificate of Location Cost
House Affordability Study
The house affordability study states that in 18 cities, home prices increased between 100 per cent and 148 per cent. What that all means is that mortgage burden increased in 38 of the 50 biggest Canadian real estate markets, and the number of cities where mortgages take up more than 30 per cent of homeowners’ income went up from 6 cities in 2010 to 16 cities in 2020 (report author Andra Hopulele).
Hopulele concludes the “increase is no match for surging home prices. In 2010, only 6 of the cities included in our analysis were on the list of mortgage-burdened markets. And in fact, with half of them toeing between affordable and unaffordable, only three were in markedly unaffordable territory: Coquitlam, B.C. (40 per cent), Sanich, B.C. (36.1 per cent), and Oakville (32.8 per cent).”
The report goes on to say that by 2015, the number of cities where mortgages take up more than 30 per cent of a homeowners’ income grew 8. “Fast forward to 2020 and the list is much longer. Moreover, with the least unaffordable market of the 16 cities taking up 32.2 per cent of homeowners’ median income, all of them are firmly positioned in mortgage burdened territory.”
Original Article – Toronto Sun