Buying a home is one of the most important purchases of your life. It’s important that you’re prepared.
For generations, owning a home has been seen as a mark of financial achievement in Canada. But how do you know when you’re ready for a mortgage?
There are several options to consider.
Location, location, location
To start, it depends on where you live.
In markets like Vancouver, Toronto, Ottawa or Montreal, home prices are very high. In Vancouver, one of Canada’s most expensive markets, the average price of a home is now well above $1 million – roughly 14 times the median family income of people living in that city.1
But even in more affordable cities, such as Halifax, the average price of a home can be over a quarter of a million dollars.2
Can you afford the down payment?
Let’s assume you’re somewhere in between and looking to buy a house listed at $400,000. The first thing you need to ask yourself is this: can you afford the down payment? To avoid having to pay mortgage loan insurance – which is provided by the Canada Mortgage and Housing Corporation – you must put down 20% of the principal.
In this case, that would be $80,000 – a huge sum of money for most Canadians.
Keep in mind that you’ll need to pay monthly utilities – like heat and hydro – property taxes and the occasional repair, which can prove expensive (for example, a new furnace can cost $3,000 or more).3
So, even if you’ve saved up enough for a down payment, it’s important that you have enough income to cover the monthly expenses that come with owning a home.
Answering tough questions
These are just some of the complex matters that you should explore before making the leap into home ownership.
If you’re still not sure you’re ready for a mortgage, speak to a financial security advisor with Freedom 55 Financial. They can connect you with a credit planning consultant who can provide you with valuable answers about your ability to afford a mortgage today and in the future.