How much money people need to make to afford a house in Canada

Introduction

Many people in Canada are struggling to afford a house and therefore, resort to taking out a mortgage. This article explores the costs of buying a house in Canada and how much money you should put aside for your down payment. Let’s get started!

Canada is known as the home of hockey, maple syrup, and the best public healthcare system, not to mention universal dental coverage. But most importantly, here you’ll find some of the world’s most expensive housing prices – followed closely by rising rents. If you’re planning on buying a house in Canada, then it’d be helpful to understand what’s involved with the process and the costs that you’ll need to cover.

In general, most people want to buy houses that are within their budget. However, this is usually easier said than done as housing prices continue to soar – making house hunting difficult for those who can’t afford a down payment. The average price of homes sold in Canada last year was $428,000 and this year according to CBC its at $716k. (Source)

That means if you had enough money saved and were ready to go house shopping across Canada, it would cost you roughly $135/day or $4355 per month just in mortgage repayments! For most Canadians, that’s expensive!

1. How Much Money Do You Need to Buy a Home in Canada?

In order to buy a house in Canada, you’re going to need to put aside a significant amount of money. Many people are thinking about how much they’ll need for it. So, we want to break down the prices in different cities and give information on how much it will cost at the minimum. The first thing you should know is how much money you’ll be making per year and how many years you plan to work for. It’s important to have that number so that you know what kind of mortgage payments you can afford, but more importantly, so that you don’t go into debt!

The average price of a house in Canada is $440,000 (last year and $716k in 2021).

Interest Rates Today: 3.75% – 4.5% Variable

You’re going to need at least 10-20% of the cost of your home for the down payment on your home. If you don’t have that kind of money saved up, you might want to consider renting for a few years until you can build enough capital to purchase your first home. One thing to remember is that banks will require a down payment from you in order to get approved for the loan; they usually won’t accept loans fully with just equity or no money from yourself as well (which would be ideal).

2.What are ways to save up for a down payment?

If you’re struggling to save up enough money for a house, there are some great ways that you can save up for a down payment. Here are some of the  best ways to make money for a house.

If you’re looking on the market for things that might be up for grabs, consider these ideas:

Sell your unused furniture.

Moving is expensive and if there’s one thing you don’t need when moving into a new place, it’s all of your old junk from your old house. While you may not see much of an immediate profit by selling your unwanted furniture, it will help bring some extra cash which can then be used towards making payments on a house or down payment.

Get rid of cable.

Do you really need 200 channels? Honestly, who does? Not only will eliminating cable help you save money but it will also increase the amount of cash that you bring home each month. So next time you want to order a pizza, celebrate with a movie night and rent one or two off of PPV.

Get rid of your car payment.

Maybe downgrading from a luxury sedan to an economy hatchback doesn’t sound like fun, but if doing so can help save the extra $200 or whatever every month for your house payments then it may be worth it in the long run. You might consider selling your car outright and walking or biking instead.

Get a roommate.

This is something that everyone thinks they won’t need until they actually do need one. You should start right now looking for someone to move in with who will split rent with you 50/50 and such cuts down on living expenses significantly which means more money towards your house payments. Also, don’t forget about utilities like internet and cable which can add up quickly when split.

Sell off those unused gadgets.

When it comes to large ticket items, selling things like your flat screen TV is a great way to bring in some extra cash and it’s definitely something you don’t need in the long run.

Get creative.

There are so many ways that you can make money for yourself if you start thinking outside of the box. You might want to think about doing some freelance work or selling off old possessions on Kijiji or the marketplace for example but whatever you do, be sure that it will provide you with the most bang for buck towards house savings.

Get a better rate from the bank.

Negotiate lower rates on both your mortgage and your credit cards. Some of the savings can be really significant.

Work overtime.

If you work extra hours or pick up part-time/full time jobs, do things you enjoy doing, then use that excess income to help build your down payment fund! It’s possible and definitely better than living paycheck to paycheck.

Don’t keep making excuses.

Figure out how much money you make each month. Then subtract rent (if applicable) from this figure. Now take that amount and divide it by the number of months until your target date to have saved enough for a home purchase. If the amount left is more than you can realistically set aside in a month, then figure out how to make it work.

Conclusion

As a result, the figure that you need to have saved up for a down payment on a house is different for everyone and should be calculated based on your economic situation. However, it’s generally recommended that you save up anywhere from 3 months of expenses to a year’s worth of expenses before you purchase a home. The exact amount will depend on how much money you make each month and what type of housing you’re looking for (i.e. condo, townhouse, etc.). If you want help saving up for a down payment or figuring out how much money you’ll need to buy a home in Canada, feel free to contact us today!