For first-time home buyers, the first year of ownership does the most damage to the bank account, says a new report from Point2, an online real estate portal..“The first year of homeownership can be daunting, given the down payment, closing costs, first mortgage payments, homeowners’ insurance and property taxes which are all new to first-time homebuyers,” says Point2, adding those costs, and the time it takes the average renter to save enough to cover some of them, vary widely across Canada..The company looked at the 50 largest cities by population and analyzed data from two categories: upfront costs and annual recurring costs. .“Upfront costs jinclude closing costs and a 20% downpayment based on local benchmark home prices,” says Point2. “Annual recurring costs consist of mortgage payments, assuming the conventional, five-year, fixed-rate mortgage with a 5.86% interest rate and a 25-year amortization period, average property tax and homeowners’ insurance.”.The national average for upfront costs was $153,171 (downpayment of $142,740; closing costs of $10,431) ranging from a high of $400,700 in Richmond Hill ON, to a low of $74,342 in Saguenay QC..Joining Saguenay in upfront costs less than $100,000 were: Trois-Rivieres, $79,517; Quebec City $84,370; Regina $88,704; St. John’s $88,956; Levis QC $89,246, and; Winnipeg $95,125..“This is largely due to somewhat manageable downpayments based on local benchmark home prices, as well as annual mortgage payments of less than $20,000,” says Point2..At the other end of the scale, the 10 most expensive upfront costs, including Richmond were: Markham ON, $383,469; Oakville ON $378,122; Vaughan ON $369,051; Vancouver $331,638; Toronto $315,031; Richmond BC $314,917; Coquitlam BC $296,694, and; Whitby ON $295,730..Of Canada’s five major markets, the first year of homeownership is more manageable in Calgary, which has the third lowest closing costs among the 50 cities measured, but the highest on the Prairies..Calgary’s closing costs are $1,904, slightly higher than $1,873 in Edmonton..Cowtown’s upfront costs are also the highest on the Prairies at $142,388, which Point2 says would take eight years to save up, based on average income (assuming a renter household sets aside 20% of the average yearly income). In Edmonton it would take five years, Regina six years, and seven years in Winnipeg and Saskatoon..In contrast, in the Ontario cities of Richmond Hill, Markham, Oakville, and Vaughan, it takes at least 20 years. In Toronto and Burlington it would take 17 years on average, much like Vancouver and Richmond in BC..To cover the full costs of the first year of homeownership, buyers in Calgary would need to save up for 10 years, while elsewhere in the Prairies it’s a bit less than that: seven to nine years in Edmonton, Regina, Winnipeg and Saskatoon..In Richmond Hill, the number of years required to save the full costs moves to 28..“For new homebuyers, the downpayment is the main hurdle and particularly difficult for those without outside financial help,” says Point2. “Assuming a 20% down payment, we applied the 50/30/20 budgeting rule to calculate how many years potential homebuyers would need to save to cover the upfront expenses of buying a home. According to the rule, we assumed a renter household would put 20% of their yearly income toward homeownership.”.The highest recurring costs are monthly mortgage payments, says Point2..“But homeowners’ insurance and property taxes can also go a long way in determining how much first-time owners will end up paying during their first year of homeownership,” says Point2..“For example, annual costs in the Ontario cities of Windsor and Oshawa were inflated by property taxes of more than $10,000, as well as $1,250 in homeowners’ insurance, despite the cities’ mid-range annual mortgages of $33,829 and $49,306, respectively.”
