FCIQ’s latest study looks at how easy it is for young couples to buy homes in the province of Quebec. How many years do they need to save up for a downpayment? How do these conditions vary from city to city within Quebec?
Data on average household income of young couples was compared to median real estate prices and saving habits of Quebecers.
Downpayment amounts were calculated as per the minimum requirement of 5%.
Income was calculated based on median income for couples between 25 and 34 years old. A 2.7% growth rate was used to measure income increase over time.
It was considered that the average household saves 5.8% of their annual disposable income, as per the average savings rate in Quebec in 2-16 and 2017. Since the study uses total income rather than disposable income, the saving rate was adjusted to 3.7%.
Notably, Montreal was found to be one of the 10 most affordable cities in Canada for young buyers.
Province of Quebec
- Total median income: $81,492
- Median price of a home: $242,500
- Minimum down payment of 5%: $12,125
- Number of years needed (3.7% of income): 4
- Total median income: $78,268
- Median price of a home: $310,000
- Minimum down payment of 5%: $15,500
- Number of years needed (3.7% of income): 5.4
Tips on saving for a downpayment:
- Pay off your debt first
The first step to saving for a home is paying off all of your other debts, such as credit card debts and student loans. Begin with your smallest high interest debt, and pay it off aggressively. Then use the minimum payment from that debt to pay off the next small debt with the highest interest rate. Once you have that one paid off, the two minimum payments that you used to pay for those smaller debts can help you pay off your next debt faster (again, choose a small debt with a high interest rate). You will notice a snowball effect as the minimum payments you are freeing up help you to make larger and larger payments against one debt at a time. This is one of the fastest ways to pay off debt.
- Create a realistic weekly and monthly budget
When creating your budget, financial planners have suggested using the 50-20-30 rule as a guideline. No more than 50% of your monthly income should go towards essential expenses, 20% should be saved, and 30% can go towards personal choices. If you find that your essential expenses are taking up much more than 50% of your income, you might consider making bigger steps to cut down your costs, such as moving to a smaller rental apartment, using public transit, or taking in a room-mate to help share expenses.
- Borrow from your RRSP’s.
Montreal’s Home Buyer’s Plan (HBP) allows you to withdraw up to $25,000 from your RRSP account to help finance the purchase of your first home. If you’re buying with your partner, that’s $50,000 – an amount likely to cover your entire downpayment and closing costs. Note that you have to pay the money back to your RRSP within 15 years. If you don’t repay the money within that timeframe, it’ll be taxed as income. Check with your financial planner or advisor to see if this option is right for you.
- See if you qualify for a First Time Homebuyers Program
Aside the HBP, Montreal also offers a few programs with interest-free loans and bursaries, for new home buyers. These programs are initiated to ease the financial burden of homeownership amongst young families, and to help develop parts of the city that are struggling. They usually have very specific requirements – check with your city hall to determine whether you qualify.
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