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The average millennial woman is, in all probability, looking for a 3 or 4 bedroom detached home for a single family. She has a budget of anywhere between $300,000 and $400,000. The ideal home is in her neighborhood of choice, close to her workplace and surrounded by all the amenities she needs. She would probably be willing to spend more for her home purchase if her commute time would be less. This is according to a survey done by TD Bank recently.
The survey likewise shows that 2/3 of millennials are not inclined to compromise by buying a smaller unit than what they want. There is one big problem, though: the average home price in Canada is currently pegged at $1,000,000.
If the buyer wants to live in Toronto, she would need $750,000, more or less in order to buy the kind of home she desires. In Vancouver, she must have somewhere in the vicinity of $1,000,000. To put it simply, a first-time homebuyer’s expectations do not jive with the actual state of the property market in most parts of Canada.
Compounding the woes of millennial women in getting through the first step in the process of owning a new home are the latest mortgage qualifying rules implemented by the federal government. If the buyer has 10% of the purchase price of the house saved for down payment (around $40,000), what she would need is a high ratio mortgage. Thus, her qualifying rate would be around 4.64%, the current posted rate of the Bank of Canada. This is true even if the contract rate worked out with her mortgage broker would turn out much less eventually.
Taking a look at the buyer’s higher-end of the search criteria, she would be eligible for a mortgage for a $400,000 house with a salary of $60,000 at a lower rate on the contract of 2.49%. But, at the higher rate, the buyer can afford only a $340,000 house.
The millennial woman now needs to restrict herself to properties in the lower 25% price range. This is even further down the average home price in the country.
The buyer may opt to stay longer in the rental market to save more money for her down payment. With enough luck, there might be a relative who is willing to loan or even gift her with additional money for her down payment. She can also try asking her parents to co-sign on her loan, which may allow her to qualify for a bigger mortgage amount.
If you are in the same situation as the millennial woman homebuyer in this post, you may want to contact your mortgage broker today to get more information.
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