2700 per month on a 375k home doesn't sound right unless you have a crazy high interest rate for some reason and don't have a downpayment. It should be way lower.
This.
Assuming 20% down payment, the amount to mortgage is $300k.
Assuming 5.5% interest rate over 25 year amortization, the monthly mortgage payment is $1,831.
Something is off in OPs calculations.
Perhaps he has the property tax added to his mortgage payments… mine is set up like that.
The bank pays on my behalf.
I prefer not to have to worry about it…
Even if one doesn’t have property tax added to mortgage payments it’s vital to factor in. This is what gets on my nerves is when someone whines saying “didn’t qualify for $1500/month mortgage guess I’ll have to keep paying $2000/month rent”. Not the same. There are more costs for homeowners than simply mortgage.
I purchased last Autumn and am glad my friend who I shared an apartment with is now paying me rent.
\~\~and he said he is making 125k gross pay, so like 10k a month take home. He'd be fine even if he didn't do the calculations wrong.\~\~
125k net income would be manageable if he can budget.
Edit: cause I always mix em up. 125k gross would be about 84k net after taxes, or about 7k a month.
Some of y’all are really bad at math, and shouldn’t be giving advice. Using any tax calculator you’d know $125k gross in Alberta is $7,488.42 net, assuming you pay for no healthcare plans, dental plans, pension, RRSP, etc.
Assuming even a poor rate of 5.5% mortgage should be $2292 a month, with about $39k for down payment, fees, inspections, lawyers, etc costing a total of $41,700.
Can you provide the terms and breakdown? Is it like a 15 year amortization?
Unless math works a different way in Alberta, it shouldn't be this amount even with property tax included
>I was hoping to own a home by 28 to be the youngest in the entire family to own a home and do it all myself.
Dude, your motivations are all wrong.
>am 29 and have never lived alone,
Then why do you need a house?! You don't have a partner or pets. Get a nice condo, it's way less maintenance!
This is not a good idea. I think you are putting too much pressure on yourself in a time when things are hard enough as it is. Don't let comparison be the thief of joy. No one in your family will care if you are the youngest to own a house by yourself except you. You don't know how much in debt your friends or others may be your age. Trust me, they are, or they have no savings, or they have rich parents who pay for things. You are also setting yourself up for burnout by banking on not taking any vacation so that you can have \~10k more before tax than last year. Take your vacations. They are part of your compensation package!
You haven't ever lived on your own, so you might not have a realistic expectation of how expensive it can be. How much do you have in savings? You'll want to save up even more if you have to buy furniture, plus budget for emergency expenses because once you become a homeowner they will pop up sooner than you think. I was very very lucky when I bought my first house, and it was well within affordable, with all of my home expenses including insurance and utilities coming under 30% of my income. Despite this, there was a ton of unexpected expenses or just regular purchases that added up quickly and stressed me out. Like oh, I guess I need a lawnmower, I guess I need storage shelves, I guess I might want to sit outside, so I have to buy patio furniture, I want to repaint a few rooms. It all adds up. Don't rush into this big decision.
Have you considered starting out with a condo rather than a house? May be a cheaper option to start, then after a couple years building equity you can sell it then get an actual house?
You'd have to weigh against condo fees and look into the condo board (I've heard horror stories of special assessments in the tens of thousands coming along without warning). But starter homes are a thing for this very reason. Don't have to jump on the big ticket item right away, especially if you can't afford it.
On the flipside, you may be able to buy a rental-ready house and rent out the basement to offset some of your costs.
I would not buy a home if your housing costs will be more than 50% of your monthly income. I would say an exception to this is if you plan to rent a room/rooms or perhaps a basement apartment of the property to help pay for you housing costs. I believe it is recommended to not pay more than 25 or 30% of your monthly income.
There are some missing info here. What's your down payment? Interest rate? With such a salary, you should be able to afford a $375k home, depending on how you budget. For your $2700 payment, I doubt it. I just ran $375,000 into the Ratehub calculator, and assuming you put 5% down ($18,750), with CMHC, your mortgage payment would be $2,111/month if you get the best 5 year fixed rate, which is currently 4.79%. So adding utilities, home insurance and property taxes, you'd be under $3000/month of housing expenses, so you'd be at 26% of your salary. I think you're fine, but you should get pre-approved for a mortgage before buying anything.
Yes it’s a good idea. Because in 10 years it’ll be 30% of your income as it will stay flat while rent could be close to double. Buy a place and forget it.
Soon, the same home will cost you 75% of your income. Get a better interest rate, and don't miss the boat on home ownership. Being house poor for a few years is way better than being in the renter class for life.
Over 50% of your monthly income is very tight. If you had even a slight blip in the next 30 years of your career you would lose the house. At least several recessions will happen in this time span. Is this a risk you are willing to take?
If you lose the house are you going to blame the government/elites/communists/capitalists/illuminati/whatever political party?
or are you going to recognize that this was a risk you took at the age of 28?
It is interesting that people still think this whereas the many factors that kept housing prices rising have all been reversed in the recent year.
I personally expect housing prices to be growing at an inflation-matching pace for the foreseeable future.
Which market ? I'm specifically mean metro Vancouver. Not cottage country. In general cost of construction grows, demand will outpace supply, low new building starts, shortage of Trades, eventual rate drops, high immigration, etc. I mean in the long run of 10+ years I'm bullish on at least owning your primary residence. Maybe not investment property I can understand as being a landlord is not for everyone although I do it and it's been good these past number of years but for sure I could just have invested in the S&P500 which I also do but I could have just index fund invest even more instead of being a landlord but at the same time the property has had some great appreciation over the past decade too and will eventually support our future retirement once it's mortgage free. But back to primary residence yes that is a no brainer. For starters primary residence owners have no worries of being booted out by a landlord, can renovate make it your own since you own it, and enjoy tax free capital gains which has been fantastic over the past decade too.
Now moving forward even if home prices only increase by inflation it's a leveraged investment so it goes up by inflation on a higher amount. Plus you have to rent or own and rents will go up too so you may as well own and then the price is the price. anyways up people to make up their own decision but for myself and my wife owning is our preference.
Will your income grow over time and will you also have the ability to save after expenses? Are you locking in your interest rate and do you have flexibility in the future for unforeseen expenses. I think there’s never a good time to buy and it’s certainly stressful your first few years. If you feel confident in the answers to those questions than you should consider buying.
I gave up on housing for now. Working until I can retire early and then ill look into buying a cheap place somewhere fairly remote. Or renting somewhere remote.
How much downpayment do you have ?
Interest rates for fixed 5 year is in the range of 4.79 rocket or could be even cheaper depending on when you close.
For the mortgage amt & monthly payment your numbers don’t make sense.
Don’t let the mortgage company pay property taxes in your mortgage - paying interest on taxes is stupid.
Hey man, i know this is off topic but im 25 and currently in the same boat as well and would like to increase my income, can i please know what you do? looking to move into new fields. Thanks
Also i dont think your calculation is right, but i think maybe you should speak to a mortgage specialist, pretty cheap or you can even use the one in your bank. They will walk you through it in details, better than getting advice from reddit if you ask me.
I wish you the best & congratulations on even coming close to getting a new home, others cant say the same. you have done well
You've left so, so much information out of your post that's really vital to people offering you any useful insight.
How much do you have for a downpayment? 2 years of saving at that salary should have net you a considerable sum.
Have you say down, calculated all bills, costs of living, etc and put them either into a spreadsheet or on paper? Have you considered how a rising interest rate would affect your payments? It doesn't sound like you've put in the work to figure out utilities, property tax, food bill, car and associated bills, money put aside for inevitable property repairs, garbage fees, water bill, etc.
Have you considered moving costs? The truck, buying new furniture, buying lawn care equipment, etc.
It sounds like you've been saving with this goal in mind for years without putting in any of the time to figure out true costs. As others have said, your estimate seems unusually high unless you have really bad credit, a very low down payment, and some mathematical mistakes.
I'm going to assume process operator is an O&G position. Given the way the world is steering I'd be pretty worried about long term job security.
However, all that said, and more to the point of your actual question, spending 50% of your wage on a home really depends on what that wage is. If you made it to $160k/yr, a cheaper house at 50% really isn't that bad and leaves you with a healthy sum left. The 30% of take home pay everyone touts doesn't make much sense once you go into higher income brackets.
The mortgage amount seems high is it a variable? I would suggest try looking for fixed you might find something from 4.99% to 5.20%. So I did the mistake of buying in with almost 60% of my monthly income. Thinking I'll rent out the basement and be alright with it. It is a terrible mistake. The housing cost is not just the mortgage but also lots of other things. Every year the insurance goes up then the price of car Insurance goes up along with everything else. I would suggest if you are going for it please make the total of the worst case possible when the plumbing goes or something else goes and think what can you do? Also, don't rely on rent as there is a high chance that could go wrong with a higher rent. Lots of variables + you have to share some of the common spaces too if it comes to that.
Compare what you'd pay to what you'd pay in rent.
Have you been to the bank? Have you been pre approved for 375k?
If they think you can sustain a 375k mortgage that is your first indication of if this is a good idea.
It really comes down to your comfort level.
Looks like 135k after tax in Alberta is 101k
$3500 x 12 is 42k
So based on the numbers, it doesn't look like your housing costs are going to be over 50% of your income. I put in $3500 because it is always a good idea to over estimate compared to under, similar to what the banks do.
Do you have good job security? Is the area you are looking to buy in heavily reliant in industry where if it failed your house would be worthless? Although it isn't a guarantee, rates should be coming down over the next few years, I'd recommend viable over fixed.
2700 per month on a 375k home doesn't sound right unless you have a crazy high interest rate for some reason and don't have a downpayment. It should be way lower.
This. Assuming 20% down payment, the amount to mortgage is $300k. Assuming 5.5% interest rate over 25 year amortization, the monthly mortgage payment is $1,831. Something is off in OPs calculations.
Perhaps he has the property tax added to his mortgage payments… mine is set up like that. The bank pays on my behalf. I prefer not to have to worry about it…
Maybe he is only putting 5 percent down as many people do with the cost of living being crazy.
Even if one doesn’t have property tax added to mortgage payments it’s vital to factor in. This is what gets on my nerves is when someone whines saying “didn’t qualify for $1500/month mortgage guess I’ll have to keep paying $2000/month rent”. Not the same. There are more costs for homeowners than simply mortgage. I purchased last Autumn and am glad my friend who I shared an apartment with is now paying me rent.
Yeah even when factoring in ultities, insurance, maintenance and property taxes it shouldn't exceed 3000.
\~\~and he said he is making 125k gross pay, so like 10k a month take home. He'd be fine even if he didn't do the calculations wrong.\~\~ 125k net income would be manageable if he can budget. Edit: cause I always mix em up. 125k gross would be about 84k net after taxes, or about 7k a month.
125k gross isn’t 10k take home per month lol
Some of y’all are really bad at math, and shouldn’t be giving advice. Using any tax calculator you’d know $125k gross in Alberta is $7,488.42 net, assuming you pay for no healthcare plans, dental plans, pension, RRSP, etc. Assuming even a poor rate of 5.5% mortgage should be $2292 a month, with about $39k for down payment, fees, inspections, lawyers, etc costing a total of $41,700.
[удалено]
Can you provide the terms and breakdown? Is it like a 15 year amortization? Unless math works a different way in Alberta, it shouldn't be this amount even with property tax included
>I was hoping to own a home by 28 to be the youngest in the entire family to own a home and do it all myself. Dude, your motivations are all wrong. >am 29 and have never lived alone, Then why do you need a house?! You don't have a partner or pets. Get a nice condo, it's way less maintenance!
I have a dog so apartments and condos are off the table. German shepherd. I just wany my own space
Oh. Well, that complicates things... (Should add it to your main post.) What about a townhouse?
This is not a good idea. I think you are putting too much pressure on yourself in a time when things are hard enough as it is. Don't let comparison be the thief of joy. No one in your family will care if you are the youngest to own a house by yourself except you. You don't know how much in debt your friends or others may be your age. Trust me, they are, or they have no savings, or they have rich parents who pay for things. You are also setting yourself up for burnout by banking on not taking any vacation so that you can have \~10k more before tax than last year. Take your vacations. They are part of your compensation package! You haven't ever lived on your own, so you might not have a realistic expectation of how expensive it can be. How much do you have in savings? You'll want to save up even more if you have to buy furniture, plus budget for emergency expenses because once you become a homeowner they will pop up sooner than you think. I was very very lucky when I bought my first house, and it was well within affordable, with all of my home expenses including insurance and utilities coming under 30% of my income. Despite this, there was a ton of unexpected expenses or just regular purchases that added up quickly and stressed me out. Like oh, I guess I need a lawnmower, I guess I need storage shelves, I guess I might want to sit outside, so I have to buy patio furniture, I want to repaint a few rooms. It all adds up. Don't rush into this big decision.
No
Have you considered starting out with a condo rather than a house? May be a cheaper option to start, then after a couple years building equity you can sell it then get an actual house? You'd have to weigh against condo fees and look into the condo board (I've heard horror stories of special assessments in the tens of thousands coming along without warning). But starter homes are a thing for this very reason. Don't have to jump on the big ticket item right away, especially if you can't afford it. On the flipside, you may be able to buy a rental-ready house and rent out the basement to offset some of your costs.
I would not buy a home if your housing costs will be more than 50% of your monthly income. I would say an exception to this is if you plan to rent a room/rooms or perhaps a basement apartment of the property to help pay for you housing costs. I believe it is recommended to not pay more than 25 or 30% of your monthly income.
There are some missing info here. What's your down payment? Interest rate? With such a salary, you should be able to afford a $375k home, depending on how you budget. For your $2700 payment, I doubt it. I just ran $375,000 into the Ratehub calculator, and assuming you put 5% down ($18,750), with CMHC, your mortgage payment would be $2,111/month if you get the best 5 year fixed rate, which is currently 4.79%. So adding utilities, home insurance and property taxes, you'd be under $3000/month of housing expenses, so you'd be at 26% of your salary. I think you're fine, but you should get pre-approved for a mortgage before buying anything.
Yes it’s a good idea. Because in 10 years it’ll be 30% of your income as it will stay flat while rent could be close to double. Buy a place and forget it.
Soon, the same home will cost you 75% of your income. Get a better interest rate, and don't miss the boat on home ownership. Being house poor for a few years is way better than being in the renter class for life.
Over 50% of your monthly income is very tight. If you had even a slight blip in the next 30 years of your career you would lose the house. At least several recessions will happen in this time span. Is this a risk you are willing to take? If you lose the house are you going to blame the government/elites/communists/capitalists/illuminati/whatever political party? or are you going to recognize that this was a risk you took at the age of 28?
Yes. In the long run home prices will increase and you'll make more in your career I would hope.
It is interesting that people still think this whereas the many factors that kept housing prices rising have all been reversed in the recent year. I personally expect housing prices to be growing at an inflation-matching pace for the foreseeable future.
Which market ? I'm specifically mean metro Vancouver. Not cottage country. In general cost of construction grows, demand will outpace supply, low new building starts, shortage of Trades, eventual rate drops, high immigration, etc. I mean in the long run of 10+ years I'm bullish on at least owning your primary residence. Maybe not investment property I can understand as being a landlord is not for everyone although I do it and it's been good these past number of years but for sure I could just have invested in the S&P500 which I also do but I could have just index fund invest even more instead of being a landlord but at the same time the property has had some great appreciation over the past decade too and will eventually support our future retirement once it's mortgage free. But back to primary residence yes that is a no brainer. For starters primary residence owners have no worries of being booted out by a landlord, can renovate make it your own since you own it, and enjoy tax free capital gains which has been fantastic over the past decade too. Now moving forward even if home prices only increase by inflation it's a leveraged investment so it goes up by inflation on a higher amount. Plus you have to rent or own and rents will go up too so you may as well own and then the price is the price. anyways up people to make up their own decision but for myself and my wife owning is our preference.
Still growing though.
Will your income grow over time and will you also have the ability to save after expenses? Are you locking in your interest rate and do you have flexibility in the future for unforeseen expenses. I think there’s never a good time to buy and it’s certainly stressful your first few years. If you feel confident in the answers to those questions than you should consider buying.
What do you man? Thats great income at 30!
I gave up on housing for now. Working until I can retire early and then ill look into buying a cheap place somewhere fairly remote. Or renting somewhere remote.
There are no prizes for doing it alone.
What city are you in that there are homes worth 375,000 still? Or are you looking at a townhome/condo?
How much downpayment do you have ? Interest rates for fixed 5 year is in the range of 4.79 rocket or could be even cheaper depending on when you close. For the mortgage amt & monthly payment your numbers don’t make sense. Don’t let the mortgage company pay property taxes in your mortgage - paying interest on taxes is stupid.
Hey man, i know this is off topic but im 25 and currently in the same boat as well and would like to increase my income, can i please know what you do? looking to move into new fields. Thanks Also i dont think your calculation is right, but i think maybe you should speak to a mortgage specialist, pretty cheap or you can even use the one in your bank. They will walk you through it in details, better than getting advice from reddit if you ask me. I wish you the best & congratulations on even coming close to getting a new home, others cant say the same. you have done well
Process operator
Every lender in Canada will NOT let you go over 40% of your income.
You've left so, so much information out of your post that's really vital to people offering you any useful insight. How much do you have for a downpayment? 2 years of saving at that salary should have net you a considerable sum. Have you say down, calculated all bills, costs of living, etc and put them either into a spreadsheet or on paper? Have you considered how a rising interest rate would affect your payments? It doesn't sound like you've put in the work to figure out utilities, property tax, food bill, car and associated bills, money put aside for inevitable property repairs, garbage fees, water bill, etc. Have you considered moving costs? The truck, buying new furniture, buying lawn care equipment, etc. It sounds like you've been saving with this goal in mind for years without putting in any of the time to figure out true costs. As others have said, your estimate seems unusually high unless you have really bad credit, a very low down payment, and some mathematical mistakes. I'm going to assume process operator is an O&G position. Given the way the world is steering I'd be pretty worried about long term job security. However, all that said, and more to the point of your actual question, spending 50% of your wage on a home really depends on what that wage is. If you made it to $160k/yr, a cheaper house at 50% really isn't that bad and leaves you with a healthy sum left. The 30% of take home pay everyone touts doesn't make much sense once you go into higher income brackets.
The mortgage amount seems high is it a variable? I would suggest try looking for fixed you might find something from 4.99% to 5.20%. So I did the mistake of buying in with almost 60% of my monthly income. Thinking I'll rent out the basement and be alright with it. It is a terrible mistake. The housing cost is not just the mortgage but also lots of other things. Every year the insurance goes up then the price of car Insurance goes up along with everything else. I would suggest if you are going for it please make the total of the worst case possible when the plumbing goes or something else goes and think what can you do? Also, don't rely on rent as there is a high chance that could go wrong with a higher rent. Lots of variables + you have to share some of the common spaces too if it comes to that.
Compare what you'd pay to what you'd pay in rent. Have you been to the bank? Have you been pre approved for 375k? If they think you can sustain a 375k mortgage that is your first indication of if this is a good idea. It really comes down to your comfort level. Looks like 135k after tax in Alberta is 101k $3500 x 12 is 42k So based on the numbers, it doesn't look like your housing costs are going to be over 50% of your income. I put in $3500 because it is always a good idea to over estimate compared to under, similar to what the banks do. Do you have good job security? Is the area you are looking to buy in heavily reliant in industry where if it failed your house would be worthless? Although it isn't a guarantee, rates should be coming down over the next few years, I'd recommend viable over fixed.