According to a new report from RBC, owning a home is getting less affordable in Canada. This news likely doesn’t come as any surprise to homeowners (or house hunters) in hot real estate markets like Toronto and Vancouver. However, Toronto and Vancouver are not alone.
According to RBC Economics Housing Trend and Affordability report:
- Housing affordability nationally has deteriorated a great deal in the last few months; housing the least affordable it’s been since 2010.
- In Q1 2016, Vancouver hit a record all-time high, with houses the least affordable they’ve ever been.
- In Toronto, they determined that owning a single detached house would take on average 71.7 per cent of household income, compared to 36.5 per cent if you owned a condominium.
- Some of the most affordable cities to own a house in Canada are in the East, including Saint John and Halifax
- What is making these homes unaffordable? House price increases are taking a larger bite out of the household budget.
“Even though paying down a mortgage to own a home, rather than paying rent, is an attractive investment option, home ownership can be very expensive. You’ve got additional expenses, like property taxes, maintenance and upkeep to consider,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
“However, the biggest expense with home ownership, as these figures suggest, is the monthly cost to service your mortgage. Taking out more mortgage debt may let you buy the house today, but may make it hard for you to keep the house in the future,” says Schwartz.
To keep debt disaster at bay, take every precaution to afford your house today and in the future.
Set the bar low
Your lender will approve you for your maximum mortgage amount when you seek a pre-approval, but don’t use that as your house budget. Use a monthly mortgage payment that you can easily afford. By settling on a price point below your budget, you are freeing up your cash flow as well, reducing your need for credit.
Save more, borrow less
The best way to keep your mortgage debt under control? Take out a smaller mortgage in the first place to afford your house. Although housing prices keep climbing in some centres, resist the urge to jump in because your emotions get the best of you.
Set up a detailed budget that will allow you to accumulate even more savings for a down payment and if necessary, push your timeline out to accommodate.
Change the wish list
Consider shopping for homes in less expensive neighbourhoods, or look for homes that might require a little TLC. Spending less on your home may allow you to do some of the work yourself and allow you to get into the market sooner.
Think about a condo or a townhouse over a single family home. These housing types still offer the investment perks of home ownership, typically at a much lower price.
Once you’ve spent years saving to buy that house and you reach that goal, you might be tempted to focus your money elsewhere. Keep those savings accumulating for such unexpected expenses like home repairs and other life emergencies. Reduce the need for credit (and extra payments) by having the cash on hand.
Is home ownership a goal for you; however your debt load is making it hard for you to make ends meet? It’s time to develop a plan that lets you pay down your debts and save for the future at the same time. To get started, contact one of our trained credit counsellors at or visit our free online debt analysis.