I was reading CBC news online the other day and an article caught my eye. The title was “70% of pre-tax income needed to buy home in Vancouver“. I had to take a double take because it said 70% of PRE-TAX income. I mean, after taxes, what does that leave you with? Another question is, how did these people get qualified in the first place? In my article, Qualifying for a Mortgage, banks require that your household expenses not exceed 32% of your gross income!
For our specific situation, we will have a Gross Debt Service Ratio (GDS) of around 17%-18% for our new home, and I’m already feeling the pinch! ;)
What I also found interesting about the article were the pre-tax income required stats for other parts of the country. 43% in Toronto, 40% in Calgary, 35.4% in Montreal and 30.5% in Ottawa.
I think it would be interesting to see some GDS stats and city of some of the home owner readers if you don’t mind posting them in the comments.
You can read snippets of the article below:
… If you can live on 30 per cent of your pre-tax household income, RBC Economics says you can afford to own a home in Vancouver.
… shows you’ll need most of the other 70 per cent just to pay the mortgage, utilities and taxes on a two-storey home in one of the country’s hottest real estate markets. The survey also shows that two-storey homes are comparatively more affordable in Vancouver, thanks to levelling prices. But the same can’t be said for the city’s bungalow, townhouse or condo markets.
… prices in those markets continue to rise as buyers focus on smaller properties as their only affordable option. And despite moderating prices for single detached homes, the survey reveals home ownership in Vancouver remains dramatically more expensive than anywhere else in Canada. RBC’s numbers show 43 per cent of pre-tax income is needed to meet mortgage payments, utilities and property taxes in Toronto, 40 per cent in Calgary, 35.4 per cent in Montreal and just 30.5 per cent in Ottawa.