I agree – those numbers are pushing the limit. I guess it’s ok for younger people who can’t otherwise buy a place to push the limits since they will probably be getting raises, promotions at work.

Gates – I’m not going to say whether you should buy or not or what to buy, but the idea of a “dream house” just doesn’t work for me anymore. A house is a house. It’s the people inside that are important.

Mike

“This calculation is based on two simple rules that lenders use to determine how much of a mortgage you can afford. The first rule is that your monthly housing costs should not exceed 32% of your gross monthly household income. Housing costs include monthly mortgage payments, taxes and heating expenses. If applicable, this sum should also include half of monthly condominium fees.

Secondly, your entire monthly debt load should not be any more than 40% of your gross monthly income. This includes housing costs, and other debts such as car payments, personal loans, and credit card payments.”

I find these numbers exceedingly high. If you’re pushed to 40% debt and say 25% income tax, that doesn’t leave much for retirement plans, other expenses (including the added expenses of owning a home), and some discretionary spending…after all, we all like to have a little fun.

Gates, I wonder what a $1/2 million house will cost you in 10 years? Or were you referring to 2017 dollars?

Your big dream has to be about more than the $ value of the home. Knowing what you “need” in a home and making a list of some “nice to haves” makes a lot more sense than just deciding on a budget for a home. This is where I get a little confused by the home buying process. In some cases, if you’re specific about a neighbourhood you want, you might not have much leeway with price ranges but I always find it odd that people determine their budget and then look for homes at or around that limit. In general, if you’re working with an agent and you tell them you are willing to spend say $300k, what do you think the likelihood is they’ll show you a house that’s listed for $200k? Pretty much nil, even if it has the # of bedrooms & bathrooms you want, etc.

My ideal home is downtown, has at least four bedrooms with as many bathrooms, and has an open, Hotel W aesthetic with immense closets. The dream is achievable, but not in Toronto and not on my budget.

And I think that says it all. Homes in Vancouver and Toronto carry the “International City Premium”. Which means that your house is marked up by 75-125%, just the way it is. At the very least, she knows what she wants in a home, but it’s also pretty clear that she can’t afford that.

I think that the missing key here is to “stretch the dream”. If you can’t reach your dream right away, you either have to find an alternate route or abandon the dream. That means you have a few options:
1. You can live forever in a house that’s “not quite” and “hope to upgrade”. This is really splitting the difference and settling for less, which is not inherently wrong.
2. You can intentionally buy small with plans on maximizing savings AND leveraging the accumulated principal to buy the dream home later.
3. You can rent and save aggressively. If you are dinks, then this is likely the easiest option. Rental apartments tend to be close to public transportation options and they tend to support the “walker’s lifestyle”.
4. Move somewhere else. Maybe not what you want to do, but owning a home in Toronto/Vancouver is not the same thing as just owning a home.

Truth is, I just moved to Edmonton, and the fiancé & I are in a similar situation. We’d like to own our own place, but we know that we can’t afford what we want. The plan right now is #3. If we can find the right deal and decide that we want to stay somewhere, then we may “upgrade” to a “starter” home. But the big dream is a half-million dollar house, but we can wait 10 years to put aside 100k for that purpose.

We’re not going to get there without pushing our savings. Right now, renting is the best way to push our savings b/c it’s so much cheaper than any of the other options.

Mike

That being said, how many people actually buy a home using 32% of gross income as their target? I suppose with two solid pensions, but if you need to save for retirement, I find it hard to imagine how a family could make ends meet on this kind of budget.

Mr. C – I don’t think too many home buyers can afford what they really want – it’s all about compromise. That said, a lot of first time home buyers make the mistake of “falling in love” with a house – if they don’t get it, it can be tough.