What income and down-payment do you need in order to buy the average home in a major Canadian city?
The average detached house in Canada costs $498,943 and you’ll need a down-payment of $24,947 and a household income of at least $97,000 to buy it.
However, the average isn’t representative of most Canadian cities. Furthermore, there can be huge price discrepancies within cities, depending on what neighborhood you choose. Nevertheless, it’s interesting to see the huge variation in home prices across Canada, depending on the province or population size.
The table below lists the minimum down-payments and approximate household income you need to afford the average detached house in Canada’s 25 largest cities:
Downpayment and Household Income Required to Purchase a Detached Home in Canada’s Top 25 Largest Cities
|Rank by Population Size||City||Average House Price||Minimum Down Payment Required||Household Income Required with Minimum Down Payment|
|7||Quebec City, QC||$280,580||$14,029||$57,000|
|20||St. John's, NL||$282,219||$14,111||$57,000|
The data in the above table was retrieved from the Canadian Real Estate Association National Price Map for July 2019 and will be updated each year. For cities that were not listed on CREA, I used Zolo.
About the numbers
House prices are changing dramatically each month in some of the cities listed above, so the data in this table can become of date quickly. Furthermore, you will always be able to find houses in your city that are priced higher and lower than the average prices listed in the table above because that’s how averages work.
Looking at my own city in the above, I would say these numbers err on the low side, particularly because they include all properties from one-bedroom condos to seven-bedroom mansions. Knowing this, I would guess the average price of the home you’re looking for is probably priced slightly higher than what’s listed above!
What is affordability anyway?
How much house you can afford is determined by your income. Unfortunately, it’s generally pretty easy to get more house than you can *actually* afford.
Calculating the income you need to purchase a home only takes into consideration the mortgage payment, estimated utility costs, and estimated property tax. However, if you have other financial obligations like a car payment, student loans, or credit card debt, the carrying costs of those will be taken into account and reduce the mortgage you qualify for.
It’s worth noting, though it’s often forgotten, that your mortgage payment isn’t the only financial obligation of homeownership. Once you put down roots in real estate, you’ll need to tend to them. This means expenses like repairs and maintenance, which you should typically estimate as 1% to 3% of your home’s value each year.
I used RateHub’s Mortgage Affordability Calculator to determine the household income required to purchase a home at the average price listed in the table. This calculator estimated property taxes and heating costs but left out condo fees and other expenses. As a result, the household income required is probably underestimated!
I did NOT include things like land transfer taxes, realtor inspections, or home inspection fees, which vary by province and can add thousands of dollars to your initial purchase price.
Saving a Downpayment to purchase a home in Canada
The minimum down-payment for a home in Canada must be at least 5% of the home’s value, but this isn’t always true. For houses less than $500,000 in price, you need a down-payment of only 5%.
For houses that cost more than $500,000, you have to put 5% down on the first $500,000 plus 10% of any amount above $500,000. For houses over $1 million, a 20% down-payment is required. You can read more about Canada’s down-payment rules here.
When it comes to saving a downpayment for a home, you want to earn the highest return on your money for the least amount of risk. Your house downpayment is not something you want to gamble in the stock market, so a high-interest savings account is the best place to stash your cash. EQ Bank offers one of the highest interest rates on your savings. Tangerine Bank is also a great place to keep your money, particularly if you’re saving your downpayment in your Registered Retirement Savings Plan (RRSP) with the intention to take advantage of the First Time Home Buyer’s Plan.
- The Best High-Interest Savings Accounts in Canada
- 3 Tricks We Used to Save a $40,000 Down Payment
- Should You Rent or Buy?
- How to Use The RRSP First Time Home Buyer’s Plan
While I used the minimum down payment in the table, I strongly encourage you to purchase a home with at least 10% down. Ideally, you want to put at least 20% down when you buy. I also strongly discourage you from purchasing a home at your max affordability based on your income.
Too many young people rush into homeownership and end up with mortgage payments that prevent them from making progress with other financial goals, like saving for retirement. Strangling your cashflow just so you can become a homeowner will ruin your ability to save and that leaves you financially vulnerable to catastrophe, no matter how beautiful your granite countertops are.
Final thoughts on buying a house in Canada
Low house prices in a particular city do not mean you should buy a home because “it’s such a great deal”. High house prices in a particular city do not mean you should buy a home because otherwise “you might get priced out of the market”. What constitutes a good buying opportunity when it comes to Canadian real estate is complicated and intensely personal, and cannot be deduced from a single table!
Hope you found this post interesting and useful!