The Toronto Star published an article about how house bidding wars in Toronto was stretching budgets. I am curious and amazed how a couple started out being qualified to buy a $450,000 homeit seemed to be as much as they could afforda year later they bought a home for $700,000.
How do you go from paying a belt-tightening $2100 in mortgage payments each month to over $3300 per month? Even stretching the amortization to 40 years, it would mean that the payments would be about $2900. And their retirement party will likely be before their mortgage burning party.
I generously calculated that in the ensuing year they were able to save the extra $61,000 that kept them from a high ratio mortgage and there by adding mortgage insurance into the picture. I am flabbergasted.
That same article sited studies that indicated carrying such long term debt is quite a burden. A mortgage-burning party is a remote possibility. The stress causes anxiety or depression about trying to make ends meet.
It is not surprising that the rate of savings has gone down to 1.8% from 20% in 1982. Household debt has increased 43% from 1999.
The bright light in the GTA seems to be Durham Region. Although housing affordability is on everyone’s mind, most areas in Durham Region, including Pickering, Ajax and Whitby, price gains are slower than metro Toronto. That means that your mortgage burning party could be before you retire.
The home that this couple could have bought in High Park for about $700,000 could have been anywhere between $300,000 to $400,000 in Pickering, Ajax, or Whitby, depending on the neighbourhood. So not only could they have pocketed the extra $800 to $1200 per month (GO train fares come cheap for the extra commute) to enjoy their new home, they could have paid off their mortgage in plenty of time to enjoy their retirement
Consider your affordability options. Durham Region looks pretty good.