What you need to know before buying your first home in Kamloops or the Okanagan
The sky-high real estate prices of recent years have kept many first-time home buyers out of the market.
Even if you have the typical or median household income in Kamloops or the Big Four Okanagan cities, there aren’t many options.
Basically, unless you can scrape together a large down payment, it’s small or older condos or prefabs that will fit this budget.
“What we’re dealing with with our clients is that they either have to look for a co-signer or they may have to get a family to contribute more down payment,” says mortgage broker Aaron Marsh of Rampone-Marsh Mortgages. to iNFOnews.ca. “We’re seeing more free deposits than ever, especially in the last year. There have been a lot of wealth transfers.”
There are only three ways to pay a deposit, he said.
One, of course, is to save the money.
That can be difficult, but new laws will allow people to save up to $8,000 a year for five years on the new tax-free First Home Savings Account.
It allows people to save up to $40,000. The money is tax-deductible when saved and no tax is deducted when spent on a home.
People can contribute from April 1st.
Another way to get the down payment is to withdraw a maximum of $35,000 from a registered retirement plan. That has to be repaid over time, adding to the strain on a relatively modest income.
A co-signer can increase the amount of a mortgage a person qualifies for by essentially increasing their income. But that co-signer is on the hook to make the mortgage payments if the buyer declines.
The other option is a direct gift.
“Here we see a lot of parents co-signing for their kids or increasing the down payment on gifts to help them,” Marsh said. “You really have to have a strong household income to qualify for anything decent.”
CONTINUE READING: A small group of several homeowners controls 29% of Kamloops, Kelowna’s markets
Another way to lower monthly payments is to increase the down payment amount. If it’s 20% or more, mortgages with a 35-year payback period reduce monthly costs.
While the down payment is key to buying that first home, there are other upfront costs to consider, like taxes and government bills, which can cost up to $10,000 or more.
Since these entry-level homes are mostly condos or prefabs, strata fees and block rentals also need to be considered.
In addition, there is the stress test, which drives up the mortgage interest rate by two percentage points.
Median household income varies widely among the region’s five largest cities, from a low of $68,000 in Penticton to $99,000 in West Kelowna, according to Statistics Canada data for 2020.
Home prices also vary widely, from a typical condo price of $360,000 in Kamloops to $503,000 for a similar unit in the central Okanagan. And it’s those typical or benchmark prices that the average household can afford.
This is how it is divided from north to south.
The median household income in 2020 was $88,000. Subtract $2,000 for shift fees, and with a 5% down payment, this household can afford a $460,000 home.
This amount is based on the mortgage calculator on Rampone-Marsh Mortgages’ website, but Marsh says there are many different calculators that can produce different results.
The cheapest home listed in Kamloops according to Realtor.ca is a 3 bedroom, one bathroom prefab at $99,000. It has 843 square feet and comes with a monthly pad fee of $531.
Similar units are available in the other cities.
But to keep more in line with what the average household can afford, a brand new, 960 square foot, one bedroom, two bathroom condo in the Summit Point complex at 1405 Springhill Dr. for $455,000. It has Strata fees of $189.33 per month.
The closest listing costs $449,900 and consists of two bedrooms, two bathrooms and 1,036 square feet at 975 Victoria St. It has a strata fee of $394.98 per month.
The median income in Vernon was $73,500, bringing the affordable home price down to about $376,000.
For $375,000, a Vernon buyer can purchase a 1,001-square-foot, two-bedroom, two-bathroom condo at the Vintage Terrace complex at 3929-22 Ave. It was built in 1992 and comes with monthly Strata fees of $379.41.
Given the proximity of the two cities, the market there is essentially one market. However, household incomes vary greatly.
In Kelowna, the median household income was $82,000, making a $425,000 condo affordable. In contrast, the median household income in West Kelowna was $99,999, which put them in the $522,000 range.
In Kelowna, a 964 square foot, two bedroom, two bathroom condo at 875 Badke Rd. in the Rutland neighborhood is listed for $425,000. This was built in 1980 and costs $293.93 in maintenance fees.
Assuming the West Kelowna buyer wishes to remain in that city, the listing closest to his $522,000 maximum is a three bedroom, two bathroom, 1,508 square foot home at 1835 Nancee Way Ct. for $514,900. Although larger than the condos listed above, this is a prefab home that was built in 2018. The amount of the monthly rental fee for the pad is not included in the listing.
An alternative is a $514,900 townhouse at 2433 Ingram Rd. with three bedrooms, three baths and 1,980 square feet. It was built in 1989 and has maintenance fees of $540.78 per month.
Here the price point falls to the lowest in the region.
The median household income there was $68,000 in 2020, which equates to a maximum house price of $345,000.
The next listing below this price is a $330,000 two bedroom, two bathroom, 1,297 square foot condo at 187 Warren Ave.
It was built in 1986 and has monthly Strata fees of $364.30.
OTHER COST CONSIDERATIONS
As mentioned above, a down payment of more than 5% is required to buy a home. There are numerous other upfront costs.
A good overview of these costs can be found here on the Bridgewell Real Estate Group Vancouver website. It was written by broker Mariko Baerg.
The list includes:
Property valuations for $300-$450 plus GST.
Home inspections at $300-$600 plus GST.
Attorney fees from $1,000 to $1,500
Title insurance, which is sometimes included in attorney fees but could add $250 to $400.
Strata Docs for $100-200
Strata’s collection fee can range from $100 to $300
Real estate transfer taxes are 1% on the first $200,000, 2% on that portion of the market value greater than $200,000 up to and including $2 million. That’s $6,000 for a $400,000 house.
GST generally only applies to newly built homes.
Other costs include home and fire insurance, property tax adjustments along with shift and utility fee adjustments, and utility connection fees.
These costs do not include relocation costs, the cost of changing locks, repairs and any renovation and furnishing costs.
“One of the biggest benefits of hiring an agent is that we know the ins and outs of buying a home and have someone to walk you through the buying process, as well as exceptions and options that can save you money,” Baerg wrote.
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