Your Household Income vs Mortgage Size

[Little Dragon]

I read a couple old threads that said your initial mortgage size for a primary residence should be no more than 2-3x your household income. Is this still a valid ratio to use for Calgary? Definitely don't think it is a good ratio for most people in Vancouver/Toronto.

Curious what your ratios are/were, trying to not over-leverage myself while balancing my wants for a home.

[ercchry]

If you're not maxing out what you qualify for, you're already in the 1% for house purchases. the rule changes last year made qualifying that much more difficult. lifestyle plays a huge role too, even something as simple as a $500 car payment can decrease your buying power if you make $75k.

the only people i see doing 2-3x income are either on the low end of the market and pay scale, or are not first time buyers and have build substantial equity in an existing property already.

[sabad66]

We are about 3.6x for our primary household. If we didn't have a negative cashflow rental property i'd feel a lot more comfortable but since we do i honestly do feel a bit uneasy sometimes.

that said, 2-3x gross annual income would be a pretty good rule of thumb. i would say 4x or even 5x is do-able if you live pretty frugally and don't have a lot of other debt payments like an expensive car.

[KPHMPH]

X > 5 :rofl:

[lasimmon]

Just bought our first place - about 3.5x household income vs mortgage.

I think its a pretty safe amount... But i feel like we bought too much ha!

[Xtrema]

https://tools.td.com/mortgage-affordability-calculator/

According to this, if I have to spend $1500/mth outside of housing (transport/food/entertainment), with a $60K income, $10K down, I can afford a condo around $200K.

Just to confirm 3-4x seems to be the norm. Not sure if this scales up tho.

[Mitsu3000gt]

I don't think I know a single person who bought at 2-3X, if you make $100K a year that is only a $200-300K mortgage which doesn't get you much - and average household income is way less than that. 2-3X seems way too low for the average person. In Calgary I think 4-5X++ is more the norm. Banks approve closer to 8X like it's nothing, so I can only imagine how many people are completely screwed if interest rates go up :rofl:

2-3X is probably smart, but not realistic for Calgary IMHO. Depends what other expenses you have as well - some people value a nicer house above things like hobbies, vehicles, going out, etc (or vise versa).

[max_boost]

I know many who bought at 2-3x

But agree, ultimately depends on your lifestyle and what you value.

[Thaco]

mine was x > 3 when we bought, but now its more like x > 1.5, not entirely happy with our living arrangements but it sure is nice to have the extra money to spend on fun stuff.. Memories with your kids can only be made for a limited time...

[killramos]

This is going to end up like the car cost / age index thread lmao

[ExtraSlow]

Max it out bitches or gtfo

[Asian_defender]

When I bought my home it was definitely more than 5x. like probably 8x. Now its about 2-3 as I've ranked up where I'm at. I also bought on my own and wanted a house so that plays into it.
If you can manage your budget properly I don't see the harm in maxing out what your approved for
After all it is your home, you should be happy with it

[CompletelyNumb]

Average Calgary Income is $67k, averaged detached home price is $418k, so that's 6x right there.

I definitely think that people making an average income shouldn't be forced to rent or live in a condo.

[Darell_n]

I don’t know anybody that was 2-3 when I bought my house in ‘04. Housing prices went full stupid shortly after.

[ercchry]

Average Calgary Income is $67k, averaged detached home price is $418k, so that's 6x right there.

I definitely think that people making an average income shouldn't be forced to rent or live in a condo.

Assuming conventional (20%+ down payment), so no mortgage insurance involved in the loan amount. The maximum loan at 25yr am that a debt free individual making $67k would qualify for is $310k, at 20% down that’s a purchase price of around $385k

If this person had debt, it would have to be less than $279/month as an instalment loan (fixed payment) or a $9300 balance on a revolving loan (cc or loc) before it cuts into buying power... this is also completely based on a home with no condo fees. $200/month fees on a townhouse would drop it to a $302k loan, and $350 (heat included) fees on a condo would drop it to a $297k loan


https://tools.td.com/mortgage-affordability-calculator/

According to this, if I have to spend $1500/mth outside of housing (transport/food/entertainment), with a $60K income, $10K down, I can afford a condo around $200K.

Just to confirm 3-4x seems to be the norm. Not sure if this scales up tho.

So, the above example is 4.6x... if you double income the max is now 4.7x so doesn’t scale too greatly, but moves a little. I would say this due to heating cost remaining the same, but taxes increase and those are the two other numbers that need to be factored into qualifying

[msommers]

A couple things to keep in mind so we're all comparing apples to apples:

- Does the calculation look at mortgage only or are people actually thinking purchase price?
- Does the calculation take into account condo fees

When I was working in the field, my mortgage + condo fees = 16% my yearly salary. That is now ~25% from salary adjustment. When I was in grad school it was more like 320% :rofl:

[Team_Mclaren]

I don't think I know a single person who bought at 2-3X, if you make $100K a year that is only a $200-300K mortgage which doesn't get you much - and average household income is way less than that. 2-3X seems way too low for the average person. In Calgary I think 4-5X++ is more the norm. Banks approve closer to 8X like it's nothing, so I can only imagine how many people are completely screwed if interest rates go up :rofl:

2-3X is probably smart, but not realistic for Calgary IMHO. Depends what other expenses you have as well - some people value a nicer house above things like hobbies, vehicles, going out, etc (or vise versa).


He's asking household income tho. If avg is 67k like someone mentioned then it would make it 130 combined. which 2-3X would get you up to 400K. with 50K down that's not out of range.

btw: what's your X on the new 700K purchase? (I'm sure you weren't bragging about it).

[Twin_Cam_Turbo]

When I first got my mortgage, it was 2.5X my average gross income at the starting point. I was 22 at the time for reference.

[CompletelyNumb]

To answer the question, I used to be a home owner, but I didn't rebuy after moving to Calgary. Priorities shifted.

When I bought my last place, it was 2.1x my income.

[A790]

1.75x income.

[realazy]

You’re asking household gross income to initial mortgage principle right?

That would skew the numbers a lot, especially when you consider larger downpayments. My wife and I are 2.5x using that logic..

[tch7]

1.0 currently, 4.6 when I bought 6-7 years ago and it was easy enough to manage with no other debt. 4-5x is what I'm thinking for my next place.

[dirtsniffer]

I'm assuming gross base pay in my answer. Total cash comp would change it in good years

[thinmyster]

2.4x Gross vs mortgage principle purchased in 2013

[ExtraSlow]

This house was maybe 3.5x when we bought it ten years ago. Household income has gone down, but amount owning has gone down too. Probably around 3.5 these days too.

[Little Dragon]

Yes, assuming a "consistent" gross pay (ignore large windfall bonuses that are once in a few years). Too many variables to account for (big bonuses, down payment %, etc.) so we'll ignore those for this poll.

Mainly just want to see how much people are/have been comfortable with in relation to their consistent gross salary.

[jwslam]

He's asking household income tho. If avg is 67k like someone mentioned then it would make it 130 combined.
You're out in lala land if you think the average dual income family in Calgary is at 130k.... Every household you know is DINK?

[ExtraSlow]

You're out in lala land if you think the average dual income family in Calgary is at 130k....
Yeah, way lower than that.

[Misterman]

If I was a first time home buyer right now in this market and what appears to be inevitable housing bubble. I would leverage myself up a bit farther to get a home with a basement rental suite. Mortgage isn't much more, and the rental income more than makes up the difference. So then you're essentially making equity compared to buying a regular home and covering the entire payment out of pocket.

[Little Dragon]

If I was a first time home buyer right now in this market and what appears to be inevitable housing bubble. I would leverage myself up a bit farther to get a home with a basement rental suite. Mortgage isn't much more, and the rental income more than makes up the difference. So then you're essentially making equity compared to buying a regular home and covering the entire payment out of pocket.

Thought about this too initially and if I could soundproof the basement I would 100% do this. Don't want to hear the person below (and vice versa) or have to worry about having friends over.

[lasimmon]

If I was a first time home buyer right now in this market and what appears to be inevitable housing bubble. I would leverage myself up a bit farther to get a home with a basement rental suite. Mortgage isn't much more, and the rental income more than makes up the difference. So then you're essentially making equity compared to buying a regular home and covering the entire payment out of pocket.

We thought about this, but the thought of buying a home and STILL having to deal with people renting and sharing walls with us was just a total turn off.

[BerserkerCatSplat]

Assuming we're talking gross combined income and initial mortgage principle (purchase price - DP), we bought our house in 2014 at 2.5x.

[rx7boi]

Wife and I bought our place at around 2.75x.

[Mitsu3000gt]

He's asking household income tho. If avg is 67k like someone mentioned then it would make it 130 combined. which 2-3X would get you up to 400K. with 50K down that's not out of range.

btw: what's your X on the new 700K purchase? (I'm sure you weren't bragging about it).

Household is what I said above. There is no way the average Alberta household is making ~$130K, especially these days. If they are I'd be shocked.

We haven't bought anything yet and I don't know what our final budget will be. I moved in with the GF temporarily and the ratio is quite favorable (cheap place/small mortgage - less than 0.5X) - that will change with whatever we buy but I have no idea what it will be.

When I bought my condo downtown 10 years ago, my ratio was around 3X on the post down payment amount.

[brucebanner]

Assuming we're talking gross combined income and initial mortgage principle (purchase price - DP), we bought our house in 2014 at 2.5x.

Assuming those factors, we purchased 2x.

[Xtrema]

Household is what I said above. There is no way the average Alberta household is making ~$130K, especially these days. If they are I'd be shocked.

We haven't bought anything yet and I don't know what our final budget will be. I moved in with the GF temporarily and the ratio is quite favorable (cheap place/small mortgage - less than 0.5X) - that will change with whatever we buy but I have no idea what it will be.

When I bought my condo downtown 10 years ago, my ratio was around 3X on the post down payment amount.

Not $130K but pretty close before the downturn for Calgary:

https://www12.statcan.gc.ca/census-recensement/2016/dp-pd/prof/details/page.cfm?Lang=E&Geo1=ER&Code1=4830&Geo2=PR&Code2=48&Data=Count&SearchText=calgary&SearchType=Begins&SearchPR=01&B1=All&TABID=1

"Median total income of economic families in 2015 ($) 115,576"

May be household is more realistic vs economic family?

"Median total income of households in 2015 ($) 99,388"

[killramos]

Not to mention I would imagine the dist is right skewed and the mean is well above the median.

130k doesn’t sound like such a bad estimate anymore if you consider that.

[Mitsu3000gt]

Not $130K but pretty close before the downturn for Calgary:

https://www12.statcan.gc.ca/census-recensement/2016/dp-pd/prof/details/page.cfm?Lang=E&Geo1=ER&Code1=4830&Geo2=PR&Code2=48&Data=Count&SearchText=calgary&SearchType=Begins&SearchPR=01&B1=All&TABID=1

"Median total income of economic families in 2015 ($) 115,576"

May be household is more realistic vs economic family?

"Median total income of households in 2015 ($) 99,388"

But we are in a downturn....4 years ago doesn't really matter IMO. I still don't believe the average household in 2018/19 is bringing in ~$130K. If there is data that shows that I would be interested to see it and gladly change my view.

[msommers]

That data is going to be next to impossible to obtain at the moment. The latest I can find is from 2016.

[blownz]

I consider myself fortunate to have gotten into the housing market so long ago.

My first house was purchased in 2000 with a mortgage just over 3 times my wage at the time (112K mortgage while making $35K) - I think the house was only $115K but the CMHC made it so it was almost 100% financing lol

Second house was in 2004 after I was married and the mortgage was just over 2 times our combined wage (230K mortgage while making $112K) - purposely less than we could do but at the time we knew we were going to try to have kids soon and weren't sure if my wife would go back to work right away (she ended up off for just over 5 years). So it was kind of the smart decision but I do wish we had spent more considering how much pricing went up. Now though we are at the point that even though we would like a bigger/nicer home and can afford it, it is no longer a priority since I think I would rather retire earlier or buy a second property.

[ercchry]

I’d say the average household would not be bringing in $130k... if one partner is currently unemployed or underemployed, or is having or just had a child... but these people are probably also pausing their home searches till both partners are back to full earning capacity, so would not be in the sample used in figuring out income to mortgage ratios on a first time home buyer

[ZeroGravity]

Our mortgage in Calgary was around 2x our household gross income back in 2006. Since then, the higher income earner has quit her paying job for a 24/7 no pay job. So at least in our household, gross income has at least halved :P

[RX_EVOLV]

We were approved for ~5.5X, which seemed crazy. We ended up doing 3X, which I'm so glad we did as my wife is now on mat leave with the new born. At 3X it's still quite manageable, couldn't imagine >5X.. and it's not just the mortgage but everything else that comes with it like higher property tax, higher utilities (probably a bigger house), etc..

[rx7boi]

Yup, house ownership ain't cheap, not to mention the additional interest. Alot of people would say "yeah it's only 3% interest though" but then the extra 250k mortgage they take on is more than they have in their bank.

[ercchry]

Yup, house ownership ain't cheap, not to mention the additional interest. Alot of people would say "yeah it's only 3% interest though" but then the extra 250k mortgage they take on is more than they have in their bank.

they still say the average appreciation in RE price is 3% though... so free money :rofl:

[Chandler_Racing]

2.5x with just my income. 1.85x with mine and my wives.

Levering up to 5x is crazy... When I think of all the shit we buy outside of the mortgage 1.85x feels like a lot of leverage.

Wife goes on mat leave in August the second income going away makes things harder.

[Xtrema]

But we are in a downturn....4 years ago doesn't really matter IMO. I still don't believe the average household in 2018/19 is bringing in ~$130K. If there is data that shows that I would be interested to see it and gladly change my view.

I would assume another census run will happen if Libs are still in power after this election but that's a whole another thread.

[Mitsu3000gt]

I would assume another census run will happen if Libs are still in power after this election but that's a whole another thread.

Wouldn't the government have this general info readily available from tax returns? I genuinely don't know, I am curious. I've got to believe they keep that data somewhere, but maybe not.

[Xtrema]

Wouldn't the government have this general info readily available from tax returns? I genuinely don't know, I am curious. I've got to believe they keep that data somewhere, but maybe not.

I think what CRA collected is private but what Census collected is public.

[Misterman]

We thought about this, but the thought of buying a home and STILL having to deal with people renting and sharing walls with us was just a total turn off.

It's definitely not for everyone. It's a compromise in the name of responsibly stewarding finances. Personally I was very happy to not pay a mortgage for 5 years on my first home as the basement suite was rented for the cost of the mortgage payment. That helped me do a lot of other things, while simultaneously building equity. I was single at the time though, so it was an easie3r decision to make than it would be now with a wife and whatnot.

[muse017]

It's definitely not for everyone. It's a compromise in the name of responsibly stewarding finances. Personally I was very happy to not pay a mortgage for 5 years on my first home as the basement suite was rented for the cost of the mortgage payment. That helped me do a lot of other things, while simultaneously building equity. I was single at the time though, so it was an easie3r decision to make than it would be now with a wife and whatnot.

This is exactly what I am doing at the moment. Not the basement suite but I just bought a property with carriage suite above the garage. Rent covers more than a half of mortgage payment so it's pretty cost effective.

[cam_wmh]

Upon first mortgage 2.6x
Just renewed, now 1.4x

Window shopping currently,.. but I'm not overly bothered.

[FraserB]

I was about 2.8x when I bought my place. Single, but I had a good down payment.

If people are getting approvals for 5x and higher, I need to stop worrying about my renewal in two years

[Mitsu3000gt]

I was about 2.8x when I bought my place. Single, but I had a good down payment.

If people are getting approvals for 5x and higher, I need to stop worrying about my renewal in two years

I think you'll be surprised at what you get approved for - it'll likely be a number you wouldn't even consider buying at. That's what happened to us anyway and I assume the industry is mostly the same.

[Xtrema]

If people are getting approvals for 5x and higher, I need to stop worrying about my renewal in two years

Oh yeah, PCF approved $180K on $40K of income with 20% down. HSBC approved $260K on 20% down as well for a non-Canadian citizen.

You bet your ass our whole country/bank is over leveraged and is the whole reason why stress test approval was implemented.

[FraserB]

I think you'll be surprised at what you get approved for - it'll likely be a number you wouldn't even consider buying at. That's what happened to us anyway and I assume the industry is mostly the same.

I actually have no idea what I would have been initially approved for. I basically went to the bank and told them I need x dollars for the house I want.

[lasimmon]

I actually have no idea what I would have been initially approved for. I basically went to the bank and told them I need x dollars for the house I want.

Me too. We decided how much we were willing to spend and then just confirmed we could get that amount.

The broker did mention for giggles how much we could have gotten approved for though. Was actually surprised how high it was even with the new tests.

[jwslam]

I started with looking at new build condos with my friends in DT in 2012/13.

Me: Tim, Can I borrow $250k for a condo?
Tim: Banks said yes

A week later
Me: Tim, I'm actually looking at townhouses now. I need $350k?
Tim: Banks said yes

A week later
Me: Tim, I want a detached now. How about $500k?
Tim: Yup no problem

All this on a new grad salary

[A790]

Canadians are hugely overleveraged, in part because we keep relaxing the rules surrounding mortgages and propping up the RE segment. None of the above is surprising to me.

[rx7boi]

Banks will lend money to anyone they can make money off of within calculated risk. They'll just take your toys away if you can't pay so it's no skin off their back.

You gotta be smart and look out for yourself and not let someone else tell you what you can borrow.

The amount of consumer debt in North American is so fucking stupid.

[Mitsu3000gt]

IMHO the smartest thing to do if buying a home with someone else is make sure you can afford it on only one of your incomes - if the wife goes on mat leave or if one of you loses their job, you don't want to have to sell your house. Same thing if interest rates go crazy, you do not want to be in a mortgage you can barely afford.

[Twin_Cam_Turbo]

I was originally offered close to double what I actually took for my mortgage. I couldn’t imagine how house poor I would have been with that mortgage.

[Misterman]

Canadians are hugely overleveraged, in part because we keep relaxing the rules surrounding mortgages and propping up the RE segment. None of the above is surprising to me.

They have actually been tightening the rules on mortgage lending. The problem is they aren't tightening the right rules. People are still house broke, they're just house broke on a 400k instead of a 700k mortgage now. For some reason they refuse to lower the debt service ratio and actually start fixing the problem.

[msommers]

I was originally offered close to double what I actually took for my mortgage. I couldn’t imagine how house poor I would have been with that mortgage.

Yeah it's pretty staggering that is allowed. What's worse, I think really naive (err foolish?) people think the bank has properly vetted them, and they actually can afford that mansion on the hill after all...

When I bought with the salary I was making, I basically doubled the interest rate to see what the bill would be. If it didn't make sense, it was too expensive.

[Mitsu3000gt]

I was originally offered close to double what I actually took for my mortgage. I couldn’t imagine how house poor I would have been with that mortgage.

We were offered over double as well. It was nuts. I guess it's technically possible if you don't want to have as much disposable income and are prepared to sell if interest rates go up, or if anything at all unplanned happens to your income. Having an $8-$10K/mo mortgage or whatever it would be is pretty crazy in my mind. It's easy to see how people get sucked into that though I guess, because a way nicer house than you can afford would be tempting to anyone especially with no immediate consequences - lots of people have no clue about finances.

[Buster]

Combine the bank's willingness to over-lend with peoples' belief that housing is a good long term asset class (it's not)...and poof.

[A790]

housing is a good long term asset class (it's not)

Can you qualify that a bit? I agree with you but am curious to hear your reasons.

[Buster]

Can you qualify that a bit? I agree with you but am curious to hear your reasons.

It just tracks inflation over the long term.

Plus all the other reasons about maintenance costs, liquidity issues, transaction costs etc.

[Mitsu3000gt]

It just tracks inflation over the long term.

Plus all the other reasons about maintenance costs, liquidity issues, transaction costs etc.

In Calgary it also tracks O&G. That's why I don't invest in any O&G, because owning a property in Calgary you are already indirectly invested there.

[ercchry]

If you guys are talking about experiences that are more than 16 months old, it’s irrelevant information. OSFI changed it all last year and 4.6-4.7x is max, unless we’re talking alt lenders at 35% or more down (well, 20-35% they can do about 50% ratios vs the 39/44 A lenders can do), or private loans

[Little Dragon]

It just tracks inflation over the long term.

Plus all the other reasons about maintenance costs, liquidity issues, transaction costs etc.

I've heard the leverage you gain on real estate is the reason most people find real estate viable, thoughts? I agree with your points.

[ercchry]

I've heard the leverage you gain on real estate is the reason most people find real estate viable, thoughts? I agree with your points.

Cost of rent also increases, most people should not be trusted with their own money as well. This debate is as old as time and the numbers can be manipulated to fit the argument for rent vs own no matter your stance on it. The fact of the matter is RE is responsible for more self made wealthy people than anything else. One of the lowest barriers of entry out of any investment and easiest to secure funding for with lowest costs of borrowing

[A790]

The sword I die on is that the house you live in is not an investment. It costs you money. If anything, it's a glorified savings account.

CMV.

[JRSC00LUDE]

The sword I die on is that the house you live in is not an investment. It costs you money. If anything, it's a glorified savings account.

CMV.

Most guys I know who have used real estate to get ahead are always maxing out the equity to put into something else, they're just paying themselves rent in the meantime.

[max_boost]

Real estate is where the ballers park their $$$ :bigpimp:

Being house poor? You're richer than you think. :rofl:

[adam c]

People saying 100-115k average household income in Calgary which is one of the highestin the country, and leveraging 2.5-4 is crazy but how the hell does it get done in Vancouver or Toronto?

[max_boost]

Foreign money or real ballers. Like I said, ppl park their money in real estate, it's not where most make their first million unless you're a developer or just random joe blow who had 10 rentals and came across as real estate boom 2006 yyc or just old money passed down.

[adam c]

Sure but average joes in those areas, curious how mortgages and leverage works out there

[lasimmon]

Canadians are hugely overleveraged, in part because we keep relaxing the rules surrounding mortgages and propping up the RE segment. None of the above is surprising to me.

Yep. But you have to admit the real reason why this is.

90% of retirements in this country are based on real estate always increasing in value (probably more).

Canada’s whole economy is built on real estate always appreciating.

[Misterman]

It just tracks inflation over the long term.

Plus all the other reasons about maintenance costs, liquidity issues, transaction costs etc.

Then factor in what your downpayment could be making you in an investment and it's even more lopsided.

However there certainly are times when real estate is a great investment, but you're right it certainly shouldn't be considered a rule in society. I've had 2 homes that I purchased purely because the economy at the time dictated housing would go up, it was inevitable. Within 5 years both homes made me a small fortune and I cashed out.

I'd actually be curious to see some real world calculations though. I would think that what you pay on principal out paces maintenance costs for most homes. If that's the case and it breaks close to even with renting, then it's cheap piece of mind to know you can't get evicted or left high and dry if the landlord decides to sell the residence you rent. I've seen numerous people with dogs be really strapped to find a home because most landlords won't allow pets.

[killramos]

Yep. But you have to admit the real reason why this is.

90% of retirements in this country are based on real estate always increasing in value (probably more).

Canada’s whole economy is built on real estate always appreciating.

If Trudeau gets his way our treasury is going to be built on it too lol

[HiTempguy1]

My whole immediate family believes in Real Estate much more than the stock market.

Our experiences have led us in that direction. Might not be technically right, but it works for us, so I will stick with it. I'd also rather invest in my business vs the stock market.

[RX_EVOLV]

My whole immediate family believes in Real Estate much more than the stock market.

Our experiences have led us in that direction. Might not be technically right, but it works for us, so I will stick with it. I'd also rather invest in my business vs the stock market.

Same here. My parents always taught us owning real estate is the #1 priority, and everything is secondary. I remember moving ~4-5 times as a kid yet we've never sold a single property. We just rent the oldone out and buy a new one, and I always thought that was normal until it was my turn to buy my first place and realizing how difficult it was. The downside is my parents always had a mortgage their entire working lives (they are now in their 70s and retired), but the upside is they now have multiple properties spanning across China, HK, Van and Calgary. Now that I'm actually older and have to really start thinking about retirement, I'm quite envious of their positions and a bit sad and disappointed that at this moment won't be able to do the same for my family.

If I win the lottery or if my business is successful, you can bet I'll be out there buying up real estates before I invest in the stock market!

[JRSC00LUDE]

I don't understand the poll options.

[Xtrema]

People saying 100-115k average household income in Calgary which is one of the highestin the country, and leveraging 2.5-4 is crazy but how the hell does it get done in Vancouver or Toronto?

Money laundering.

[austic]

we are about 2. we put 20% down for a conventional and using gross income

[Swank]

I don't understand the poll options.

Confused me too, I think your position is x and each number is a multiplier i.e. 2 <= x < 3 would mean your initial mortgage would have been between 2 times and 3 times your household income.

[Mitsu3000gt]

I don't understand the poll options.

Low number good, high number bad haha.

Mortgage divided by household income = X

[rx7boi]

Give him more credit, I think he at least understands that part haha.

Poll could have just been hyphenated and went 1-2, 2-3, 5+ etc without going through all the bullshit of greater than X but less than X.

[tonytiger55]

When I was in baking it was take your salary and x5. After having to fix peoples financial profiles and bail people out I learned even though thats how much you qualify for, DOES NOT MEAN YOU SHOULD.

Also this gets skewed with the type of real estate people want vs what they can actually afford over 25 years. i.e mini mansion, house, townhouse and condo.
A lot of people/clients want to have the same kind of lifestyle before owning a home too. It does not always work like that. They don't seem to understand they need to put money aside to deal with things that will come up.

A friend of a friend was hell bent on owning a house. But she lacked maintenance skills, there was the other factor of property tax, utilities being higher. So she ended up selling and moving into a condo.

It comes down to lifestyle, affordability with money aside in dealing with shit that comes up. Because as you get older, needs change, as well as life events WILL come up. Your mortgage person or Financial adviser (from what I have seen here) will NOT calculate those factors.

[Mitsu3000gt]

One of my best friends is a mortgage specialist, and he tells me the most surprising thing is how hard people try to hide things from him (like huge debt, bad credit, etc.) These are people going out of their way to be intentionally deceptive so they can over-leverage themselves even more and dig even deeper into a financial hole. It's shockingly common. When there are no immediate consequences, so many people just don't have a clue how to deal with their finances.

[Ekliptix]

I made some assumptions about the instructions, then voted: Mortgage amount borrowed / gross household income.

[gqmw]

Sure but average joes in those areas, curious how mortgages and leverage works out there

For Toronto, would say your "average joe" is probably renting long term. Most people who end up buying these days are above average earners and they're probably around 3.5-5x gross on the mortgage. The other option though is definitely to buy further out in the GTA, where the tradeoff is you get something decently priced but you commute over an hour. But even the outskirts are going up in price.

[Buster]

I've heard the leverage you gain on real estate is the reason most people find real estate viable, thoughts? I agree with your points.

Ya, I think I've made that point around here a few times.

RE is popular not because it is inherently a good asset to hold, but because it is one of the only asset classes where the average joe can apply leverage. And significant leverage at that. Ask someone if they want to take their retirement stock holdings and apply leverage at 4:1 or 5:1 and they would call you crazy. And yet people do it all the time with RE - with all of the inherent problems of the asset class.

I own my primary residence, but I don't really consider that ownership a positive trait.

[Xtrema]

I've heard the leverage you gain on real estate is the reason most people find real estate viable, thoughts? I agree with your points.

https://www.investopedia.com/articles/mortgages-real-estate/10/increase-your-real-estate-net-worth.asp

Just like everything in investment, it can go both way.

http://creastats.crea.ca/calg/images/calg_chart05_xhi-res.png

While it sucks to use 2019 (pretty shitty right now) as reference. If you bought an average priced home in 2010, you would have gained $50K in value.

But during that time, you would have paid:

$20K in CoC taxes
~$100K in Mortgage interest

So really, you spent $120K for $50K gain. That's before you have to pay a realtor ~$10K to offload it. So if you put in $50K down to buy that house, you just lost all of it. And that's before whatever repairs you have to do in that decade.

But if you pay $1500/mth for 120 months, you would have lost $180K in rent. Say your $50K turns into modest $65K in 10 years, that mean your cost of shelter is around $165K.

So like Buster said, as investment it sucks. But if you need a roof over your head anyway, it could be cheaper but basically a wash if the house you own need any major repairs

People who wins the RE game all bought before 2004.

https://findcalgary.files.wordpress.com/2012/04/sfh-10yearprices.png

[ercchry]

^^the assumptions in your math hurt my head...

So right now apples to apples houses, rent is higher than mortgage. Mortgage has a principal portion which is essentially a forced savings account... if you spent $180k in rent, you would have spent less on a mortgage (let’s call it a wash after property taxes). You would get about half of that back over a 10yr span assuming 25yr initial am. If it appreciates $50k, and it costs about $20k to “unload it” then you still net a $30k gain on your initial down payment... PLUS you get back all that equity you built by paying a mortgage which in this cause we could call $90k... so you get $50k dp, $90k equity, and the $30k gain (which as a primary residence is tax exempt btw) vs $15k gain on your $50k investment... which 20% of will go to cap gain tax...

Boom, numbers are stupid and no one has a crystal ball :rofl:

[max_boost]

So much marth lol

[Buster]

RE rates of return should be risk adjusted. People rarely look at it that way though.

[msommers]

This is a really interesting read guys. Cheers.