Millennials are finally thinking about settling down and buying a home. Many, though, are running up against the new mortgage rules that kicked in on Jan. 1.
The rules, essentially, require even borrowers who can afford a 20 per cent down payment on a house to show that they would be able to keep up with their bills if their mortgage rate rose by two percentage points.
For older or so-called “peak millennials,” Canadians between the ages of 25 and 31, the new standard means having to settle for a home that is around $40,000 cheaper than what they would have been able to afford in 2017, according to a new report by real estate giant Royal LePage.
With an average salary just above $38,000, the most expensive home a typical, single millennial can hope to buy is worth just over $200,000 with the new rules, calculates Royal LePage. For a couple with a combined income of $76,000, you’re looking at a maximum homebuying budget of around $400,000.
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The average Canadian home priced between $325,000 and $425,000 had 2.7 bedrooms, 1.8 bathrooms and 1,269 sq. ft. of living space – arguably enough for a young family.
But what $400,000 actually gets a young couple is strikingly different depending on location. Around Vancouver, they’d likely have to make do with a one-bedroom condo and living quarters of less than 800 sq. ft. In Halifax, they’d be able to buy a three-bedroom, three-bathroom home that’s more than twice as big. And in Moncton, N.B., the 20 per cent down payment they’d have to fork over in Toronto or Vancouver would be enough for a house.