Another question for the trades guys here

[GreyGhost]

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How much should someone be making/spending to afford a house in Toronto, in your opinion?

If you are talking a detached house, I would think in the ballpark of:

$951,000(average detached house price)*.8(loan amount w 20% downpayment)=761,000
Servicing loan is approximately $500 per $100,000 per month so monthly payment is ~$3800.
This payment should be ~25% of net income, so net income needs to be $15000 per month.
Therefore gross income needs to be ~$20000/month or $240,000 per year

This should be close to correct but it can be pushed around a bit (especially downpayment and % of net income). Best case (20% down and 30% ratio) is $150,000 per year. Worst case (5% down and 25% ratio) is $280,000. Buying a detached house in Toronto without a substantial downpayment (ie. hundreds of thousands of dollars) is beyond the reach of most.

Obviously many people bought houses long ago when the math wasn't so painful, so they can afford to hang out in the house they have on much lower income. Alternatively, give up on the idea of detached and the situation improves (although to comfortably make a real go of it, household income needs to be $75,000+, preferably $100,000+).

 

[unL33T]

Someone correct me if I'm wrong but the formula is something around no more than 35 or 40% of your gross income should go toward housing ie. Mortgage, taxes, heat, hydro etc.

Hmm ok so average price in Toronto is $965,000 (quick Google search).
20% down = $193,000
Mortgage amount = $772,000
Mortgage payment via RBC Mortgage Calculator assuming 5% fixed interest (I know current rates are lower than that but I'm trying to be conservative) = $4,490/month ($53,880/year)
If $53880 is 35% of your income you'd have to be making at least $153,942.86 after tax.

I'm quite a bit low for several of those numbers, not taking into account the money I burn. Good to know. But according to the demographics there are an awful lot of areas in Toronto where people are making much less than that. Maybe I wasn't looking at the appropriate demographic map. The one I looked at probably doesn't discern between home owners and renters.

 

[kellen]

Hmm ok so average price in Toronto is $965,000 (quick Google search).
20% down = $193,000
Mortgage amount = $772,000
Mortgage payment via RBC Mortgage Calculator assuming 5% fixed interest = $4,490/month ($53,880/year)
If $53880 is 35% of your income you'd have to be making at least $153,942.86 after tax.

I'm quite a bit low for several of those numbers, not taking into account the money I burn. Good to know. But according to the demographics there are an awful lot of areas in Toronto where people are making much less than that. Maybe I wasn't looking at the appropriate demographic map. The one I looked at probably doesn't discern between home owners and renters.

You forgot to add in taxes, insurance, hydro, heat, maintenance.

 

[unL33T]

You forgot to add in taxes, insurance, hydro, heat, maintenance.

I know. I simplified because I have no idea how to estimate all that stuff.

Not doing as well as I thought. I figured since Mongrel started the thread by saying he's at $24/hr single income which would be enough for a condo and I'm at over $30/hr per person on dual income, the math just might work out fairly well.

I've actually considered condos but once I spec one out that is about the size of our current apartment, it costs nearly the same as a semi detached home but instead you're in a large building, have to deal with condo boards, parking is extra on top of that, mortgage is almost the same, and maintenance fees are half the mortgage cost, too.

Did anyone ever answer the question I saw pop up in this thread asking what "doing well" meant?

 

[Schneller]

But according to the demographics there are an awful lot of areas in Toronto where people are making much less than that. Maybe I wasn't looking at the appropriate demographic map. The one I looked at probably doesn't discern between home owners and renters.

Most of those people bought their houses a while ago, before prices started going crazy.

 

[ZX600]

I know. I simplified because I have no idea how to estimate all that stuff.

Not doing as well as I thought. I figured since Mongrel started the thread by saying he's at $24/hr single income which would be enough for a condo and I'm at over $30/hr per person on dual income, the math just might work out fairly well.

Did anyone ever answer the question I saw pop up in this thread asking what "doing well" meant?

Condos can be found for 200k, that is way less than the cheapest house.

But even then you still need to have the ability to save and put some money in the bank every month for the down payment and most people are in the red.

 

[kellen]

I know. I simplified because I have no idea how to estimate all that stuff.

Not doing as well as I thought. I figured since Mongrel started the thread by saying he's at $24/hr single income which would be enough for a condo and I'm at over $30/hr per person on dual income, the math just might work out fairly well.

I've actually considered condos but once I spec one out that is about the size of our current apartment, it costs nearly the same as a semi detached home but instead you're in a large building, have to deal with condo boards, parking is extra on top of that, mortgage is almost the same, and maintenance fees are half the mortgage cost, too.

Did anyone ever answer the question I saw pop up in this thread asking what "doing well" meant?

Taxes on a $900,000 house would be $10,000/year easily

 

[GreyGhost]

I know. I simplified because I have no idea how to estimate all that stuff.

Not doing as well as I thought. I figured since Mongrel started the thread by saying he's at $24/hr single income which would be enough for a condo and I'm at over $30/hr per person on dual income, the math just might work out fairly well.

Did anyone ever answer the question I saw pop up in this thread asking what "doing well" meant?

As a percentage of house price (roughly)
Taxes 1%
Maintenance 1%
Heat/Hydro 0.5%

So on your $965,000 house, that stuff is worth ~25,000/year. Therefore, using your numbers $(53880+25000)/.35=$226,000 net yearly income. Craziness.

Since people are avoiding your "doing well" question, wrt to financial matters I will go with able to make your financial obligations with a buffer to allow for life to happen without causing your financial obligations to immediately affect you. Personally, I think the closer you can get to living on one income while earning two is an awesome goal. Obviously in the 416, this is not remotely possible, in many areas it is and it allows a lot of flexibility in life. Imagine one person being unemployed and all you have to give up is restaurants/vacations/booze. No major changes in your life. Awesome. Obviously the second income should not be blown, it should be invested/saved/kept for a rainy day.

 

[unL33T]

Condos can be found for 200k, that is way less than the cheapest house.

But even then you still need to have the ability to save and put some money in the bank every month for the down payment and most people are in the red.

I've seen some of those condos. They're not much bigger than my living room. I've seen fully detached homes with garages for $400k as well but you wouldn't want to live in them.

 

[unL33T]

Taxes on a $900,000 house would be $10,000/year easily

When you're talking incomes of over $150k I don't think another $10k is a huge impact. If you're that close to my bare minimum number, you're too close.

 

[ZX600]

I've seen some of those condos. They're not much bigger than my living room. I've seen fully detached homes with garages for $400k as well but you wouldn't want to live in them.

Sold a Condo by the Rogers Centre for over 400k, so it all depends

 

[kellen]

When you're talking incomes of over $150k I don't think another $10k is a huge impact. If you're that close to my bare minimum number, you're too close.

That's 7.5% of $150,000 income

That's a lot of dough


Property tax is my biggest houshold expense aside from the mortgage

 

[unL33T]

Sold a Condo by the Rogers Centre for over 400k, so it all depends

I don't get what you're pointing out with this information. You basically said condos were cheap, I said not really, you come back with an example of a more expensive condo?

 

[unL33T]

That's 7.5% of $150,000 income

That's a lot of dough


Property tax is my biggest houshold expense aside from the mortgage

Fair enough. So add $25k to my number.

 

[nfq]

Multi-generational living under one roof has come back. I know it's not the north american norm, but it's becoming more prevalent for those that want home ownership.

Example: 2 brothers with their wives, living under the same roof as the parents. That's 6 adults under one roof. 5 work full time, 1 stays home. The 1 that stays home takes care of the kids/grandkids (save on daycare costs) while the rest work. Distribute the cost of the house 3 ways. After certain amount of time (5-7 years) 1 couple moves out, takes parents with them, the cycle continues for them in a different house. How the contract works between them and the split of buying each other out, is up to them. I've seen this work successfully twice now, and it's one example of how people are dealing with half million++ $ homes.

 

[Riceburner]

half mill houses are not a big deal anymore....even 1 mill seems to be pretty common.

 

[backmarkerducati]

Taxes on a $900,000 house would be $10,000/year easily

It is about 6500 actually. Even lower when we consider that the MPAC assessed value is likely 750K so we are looking closer to 5400. For Toronto of course.

http://wx.toronto.ca/inter/fin/tax.nsf/Tax?OpenForm

 

[kellen]

It is about 6500 actually. Even lower when we consider that the MPAC assessed value is likely 750K so we are looking closer to 5400. For Toronto of course.

http://wx.toronto.ca/inter/fin/tax.nsf/Tax?OpenForm

Wow, that low eh. I pay $4500 on my $300k house in Woodstock

 

[nfq]

Wow, that low eh. I pay $4500 on my $300k house in Woodstock

The lower rates help keep the prices high.

 

[backmarkerducati]

Wow, that low eh. I pay $4500 on my $300k house in Woodstock

What size is your house and what size is your lot?

I do not know the "average" for Toronto but 900K will get you 1500 to 2000 sq.ft outside of downtown. Lot will be 40 feet by maybe 100 (in that ballpark). My guess is your 300K house is larger than this in Woodstock.

Downtown you are looking at maybe 800 to 1000 sq.ft and a lot that is 25 by 80, likely no parking.

It is very area dependant.

The debate is, they base PT on the value of the home (Toronto looks cheap) but the costs for the city are really more related to the size of the house (Toronto looks expensive).

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