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Would I qualify for a mortgage in Toronto? Average household income needed to qualify in the GTA.

Based on current average home values in the GTA, the only type of home that does not require a six-figure income to qualify for a traditional mortgage would be “average-priced” condominium apartments. It would take a household combined income of $92,825 (based on assumptions listed below) to qualify for the average condominium.[1] Including all home types, based on average current pricing, it would require an approximately $147,750 in household income to conventionally finance the average Toronto home (based on average home price of $864,228.)

 

Average household salary needed to buy an average GTA home by home type. (Data from RedPin)
Average household salary needed to buy an average GTA home by home type. (Data from RedPin)[1]

The relative affordability of condominium — literally the only home type in Toronto that can be traditionally mortgage financed for a household with under $100,000 in annual income (conventionally, with a normal down payment)* — is one of the reasons the prices on condos continue to rise significantly in demand and price. As of the last census (2015), the median Toronto family income was $78,280 [see Census data below.]

 

Average monthly payments on a conventional mortgage, estimated by average home value in GTA for July 2017. [1]

This means, for the average Torontonian looking to buy in their beloved city, condominiums might be just within reach of many, but all other home types are not affordable to the median wage-earner — at least not without non-conventional financial support (such as generous family members.)

The good news: July more affordable

Based on the average pricing, with the exception of condos (which have gone up in pricing due to demand), all other home types are slightly more affordable in July versus earlier in the year, based on “needed household income”. For example, for a detached home, from January to July we would hypothetically need a household income of $200,663 to qualify for the average detached home mortgage. From May to July this dropped $11,430 to 189,232.

On the other hand, the increase in condo apartment values as an average increased the needed household income from $92,925 to $94,350. The price pressure is on condominiums due to increasing popularity from both new buyers and down-sizers looking for a more affordable solution that keeps them close to downtown Toronto.

Household income by home type

In the GTA, based on July average values (the last available data), you will need the following household incomes to qualify for conventional financing [2]:

  • For the average detached home at $1,149,861, with a monthly payment of $4,349, household income required: $200,663.
  • For the average semi-detached home at $807,532, with a monthly payment of $3,054, household income required: $143,550.
  • For the average freehold townhouse at $734,029, with a monthly payment of $2,776, household income required: $131,400.
  • For the average condo townhouse at $575,722, with a monthly payment of $2,176, household income required: $104,720.
  • For the average condo apartment at $511,112, with a monthly payment of $1,933, household income required $92,925

Only the condo apartment is conventionally accessible to a household with income below $100,000. Various mortgage companies will vary in their calculations, rates and outcomes, of course, so always consult your mortgage specialist.

 

Median income by city in Canada for 2015, the last available data from Statscan Census.

 

*Assumptions for The Red Pin’s numbers

  • Stats based on 2017 year-to-date figures from the Toronto Real Estate Board (TREB)
  • Amortization 25 years
  • 2.99% Fixed interest rate
  • Assumes monthly utility costs included
  • Down payment of 20%
  • Condo fees estimated for at $0.59 per square foot and $400 for condo apartments and townhomes respectively
  • Property tax calculated on a per-city basis

NOTES

[1] Data from TheRedPin.com

[2] Real numbers will vary, mortgage companies also substantially vary. This comparison is only for “averages” and not intended to be used for planning. Ask your mortgage specialist for real numbers.

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