Great, you borrowed a downpayment from your parents. Only one problem — your income needs to be much higher to qualify for the mortgage. The majority of households would not qualify for a mortgage on a typical home, according to National Bank of Canada (NBC) data for Q1 2021. That’s for a typical home, if you exclude condos like you’re some sort of socialite, it’s much higher. For a non-condo, a household needs to be in the top 5% of the income distribution. We’re not just talking about Toronto or Vancouver either. That’s where the composite price of all major cities are at. Let’s dive into the data.
Canadians Need A Minimum Household Income of $130,000 To Qualify For A Mortgage
Canadian households need a huge boost in income if they want a mortgage. The minimum qualifying household income to carry the payments on a typical home reached $130,921 in Q1 2021. If you’re not into a condo apartment, bump that income to $164,014 for a non-condo, which includes townhomes. Remember, this isn’t Toronto or Vancouver — it’s an aggregate of major cities in the country.
Canadian Minimum Income To Qualify For A Typical HomeThe minimum income required to carry a mortgage on a typical home (composite) in Q1 2021, as well as non-condo housing. The median income is shown for context. Source: NBC; Better Dwelling.
As you may have guessed, that’s just a little higher than the vast majority of Canadians can afford. NBC estimates the median household income is only $75,994 in the composite index cites. It would require a 72.28% increase to qualify for a typical home, and a 115.82% increase for a non-condo home. In other words, only the top 5% of Canadians can now afford the mortgage payments on a non-condo across Canada.
Toronto Home Buyers Need $172,000 In Household Income
Over in some place called “Toronto,” incomes need to be substantially higher. To qualify for a mortgage on a typical home, the minimum household income needed to be $171,771 in Q1 2021. For non-condo buyers, that number is a minimum of $183,594 in annual income. Not even all of the top 5% could clear that barrier.
The median income estimates are a little higher than the urban aggregate, but even further away for a typical home. NBC estimates the median income at $86,433 in Q1 2021. The median household would need incomes to increase 98.73%. For those a little closer to the ground in a non-condo, they would need incomes to rise 112.41%. Sounds hard, but you’ve got 24 years to think about that while you save your minimum downpayment.
Vancouver Home Buyers Need $192,822 In Household Income
They don’t joke about BC standing for “bring cash” because the province is known for affordability, but Vancouver is unreal. The minimum income to qualify for a typical home reached $192,822 in Q1 2021. For those looking at a non-condo, they’ll need to bring in a minimum of $237,201 in household income. Yes, this is more than double the median income for households in the city.
Yeah, the median income across Greater Vancouver isn’t even close to being able to attain a mortgage. NBC estimates it was just $85,135 in Q1 2021. The median household needs their income to rise 126.49% to hit the minimum qualification for a typical mortgage. If they want a non-condo, it would need to rise 178.62% for the minimum. Since it also takes 33 years for a downpayment, working on a time machine to go back to 1980 and buy a home may be a more reasonable option for many.
Montreal Home Buyers Need $87,200 In Household Income
Montreal real estate used to be known for its affordability, but not if you’re earning a local income these days. The minimum qualifying income for a mortgage on a typical home reached $87,202 in Q1 2021. For a non-condo, it’s $94,760 for the minimum. That may not seem outrageous in contrast to national numbers, but it’s still out of reach for local incomes.
A household earning the median income would need their incomes to rise more than a quarter to qualify. The median income is estimated to be $69,563 in Q1 2021. The median household needs their income to climb 25.36% to qualify for a mortgage on a typical home in the region. For a non-condo, they need a 36.22% increase in income. It may sound reasonable in contrast to the previous regions, but it is still far out of reach for locals. That’s how out of whack Canada’s real estate prices are these days.
Hamilton Home Buyers Need $145,000 In Household Income
Hamilton real estate may be a small market, but it’s getting some international attention for its recent price climbs. The minimum qualifying income for a typical home reached $144,574 in Q1 2021. For a non-condo, it’s $153,693 for the minimum. As is the theme, this is much higher than local incomes can afford.
Surprisingly Hamilton has one of the highest median incomes in the composite, but still far from the minimum needed. NBC estimates the median household income is $89,413 in Q1 2021. This means a median household needs their income to rise 61.69% for a typical home, and 71.89% for a non-condo. Considering it’s such a large gap, the extra few points for a non-condo seems almost trivial.
Lowering mortgage rates while prices were rising, allowed home prices to catapult higher. The minimum qualifying income is now so high, the vast majority of homeowners wouldn’t be able to ever buy their own home. Since mortgage rates will only go higher from here, there’s only two possibilities.
Home prices will either need to fall, or incomes will need to surge higher. The latter option is near impossible, considering the amount incomes need to rise. Although this isn’t an immediate problem, considering it takes decades to save the down payment.
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