According to the Realtors Association of Hamilton-Burlington, the average price for a residential property in the Hamilton and surrounding areas for January 2022 was $1,058,756. This was a 34.7 per cent increase compared to January 2021.
The down payment is the amount of money a purchaser puts up to buy a property. According to the Canada Mortgage and Housing Corp. (CMHC), for a property worth less than $500,000, the minimum down payment is five per cent. If the property value is above $500,000, it’s five per cent for the first $500,000 and 10 per cent for any amount above that to a limit of $1 million. Any property valued above $1 million requires a minimum 20 per cent down payment.
But according to the online job board Indeed, the average income for an individual in Ontario was just $49,000 last year.
“Becoming a homeowner is a dream now for the average Canadian,” said real estate agent Aamir Sajjad. “With average prices over a million, an individual would require $200,000 to get a mortgage on the property.”
Sajjad explained that people often don’t realize that after getting a $200,000 mortgage on a million-dollar property, they still owe $800,000 plus interest for around 25 to 30 years, which can consume most of their income.
“There is a term called house poor, which refers to a person who spends a large amount of their income on homeownership expenses. Right now, most people here are millionaire house poor,” said Sajjad.
According to Sajjad, there are ways to save up for your down payment by maxing out your annual RRSP contributions and you must be frugal.
Also, houses out of the city area tend to be cheaper, so you could speed your way to homeownership by entering the market with just five per cent down and a lower monthly payment. CMHC also provides a first-time homebuyer incentive which provides up to five percent of the value of a resale home and up to 10 per cent for a newly constructed home.