Urban Mortgages on an Extreme Budget – Ever wondered what kind of mortgage you can get on minimum wage in a big city? – Ask a Vancouver Mortgage Broker
March 10, 2013 by Adil Virani
Filed under Home Series, Latest News, Latest Rates, Mortgage FAQ, Recent News, Selling Your Home, Vancouver Mortgage Broker
Ever wondered what kind of mortgage you can get on minimum wage in a big city?
Minimum wage in Canada ranges from $9.75 per hour in Alberta to $11 in Nunavut. In Ontario and BC, it’s $10.25.
Using standard insured lending guidelines, someone earning even $11 per hour and working 40 hours a week could theoretically qualify for a $118,000 house.
Out of curiosity, CanadianMortgageTrends.com searched every MLS listing within Toronto, Montreal and Vancouver city limits for such a property.
We figured it would be a tall order to find properties accessible to a near-minimum wage earner in these cities, and it was. Out of thousands of real estate listings, there wasn’t one home that was cheap enough for an $11-an-hour employee to get a typical high-ratiomortgage on.
Interestingly, Toronto had numerous condos that met the price criteria (some as low as $80,000). But the condo fees in each case lifted the gross debt service (GDS) ratio of our hypothetical applicant well above the 39% government-set limit. That would immediately dash the mortgage approval hopes of any such borrower.
We also found a nice mobile home in West Vancouver, B.C. of all places—one of the most affluent locales in the country. But despite an $89,000 price tag, the obligatory monthly “pad rental” fee would jack up a minimum wage applicant’s GDS ratio and thwart approval.
In experiments like this, it quickly becomes apparent that employees at a subsistence-level income can’t go it alone when buying in our major cities.
For most near-minimum wage earners who don’t have down payment help, finding a co-applicant is often the only hope they have of buying in Canada‘s biggest cities.2
Footnotes:
1 Assumes good credit, 5% down, no other debt and a lender that’s comfortable with the borrower’s employment stability.
2 Down payment help can sometimes come from things like a family gift/loan or municipal housing programs.
Rob McLister, CMT
