Updated Home Affordability Numbers

Hey Guys!

I thought some of you might be interested in seeing some affordability numbers in today’s housing market.  

Let’s look at how much income is required to purchase two properties, as an example:

1) $650,000 detached home. 

2) $375,000 townhouse condo.

Read to the bottom to find out how much more income is required to purchase the same home due to higher qualifying rates!

Detached Home—Value $650,000

These are the relevant Mortgage numbers to purchase a $650,000 home in Calgary.  I am assuming $4,900/mo of property tax and $150/mo of heating cost.

Let’s look at various down payment percentages, income required for qualifying and Mortgage payments. 

Minimum down payment: 

• Down payment: $40,000.
• Income required: $160,000/yr.
• Monthly payment:
  • Fixed: $3,850/mo.
  • Balance at the end of 5 years: $565,297.

10% Down Payment:

• Down payment: $65,000
• Income required: $153,000/yr.
• Monthly payment:
  • Fixed: $3,660/mo.
  • Balance at the end of 5 years: $537,438

20% Down Payment:

• Down payment: $130,000
• Monthly payment (25 year amortization):
  • Income required: $137,000/yr
  • Fixed: $3,216
  • Balance at the end of 5 years: $464,736
• Monthly payment (30 year amortization):
  • Income required: $132,000
  • Fixed: $3,041
  • Balance at the end of 5 years: $483,487

Townhouse Condo—Value $375,000

Let’s assume $2,820/yr for property tax, $250/m for condo fees and $100/m for heating expense.  Here is what this purchase would look like!

5% Down Payment:

• Down payment: $18,750.
• Income required: $98,000/yr.
• Monthly payment:
  • Fixed: $2,248.
  • Balance at the end of 5 years: $330,143.

10% Down Payment:

• Down payment: $37,500.
• Income required: $93,000.
• Monthly payment:
  • Fixed: $2,111/mo.
  • Balance at the end of 5 years: $310,060.

20% Down Payment:

• Down payment: $75,000
• Monthly payment (25 year amortization):
  • Fixed: $1,855/mo
  • Income required: $83,000/yr
  • Balance at the end of 5 years: $268,116
• Monthly payment (30 year amortization):
  • Fixed: $1,754/mo
  • Income required: $80,500/yr
  • Balance at the end of 5 years: $278,358

Conclusion:

The run up of interest rates has created an environment of more income being required to afford the same home.  

On average, in all of the scenarios above, the income required TODAY to afford the same house has risen by approximately 17.5%.  

For me to afford the same home today, as I could about 7 months ago, I would need approximately 17.5% more income.  

I hope you find this interesting.

If you have any questions, or any Real Estate need coming up, reach out. 

Cheers,
Chad Moore