Average London (Ontario) Home Buyer
The average home price in the London area is $329,000 – which begs the question “who can afford to buy?”
Assuming the home buyer has the requisite 5% down payment and the 4% for CMHC insurance as well as the roughly $1,500 for legal fees and disbursements (totalling $30,452) all that remains is to qualify for the mortgage.
With a remainder mortgage of $312,550 at 3% interest, monthly payments would be about $1,479. Coupled that payment with monthly property tax costs of around $350 and monthly heating expenses of about $100 – the total housing costs for a year would be approximately $23,148.
Since the standard Gross Debt Service (GDS) ratio is 32% that means an annual gross income of $72,337 would be required just to service that mortgage debt. A higher income would be required to qualify if more debt (such as credit cards, car loans or lines of credit) is being carried.
Interestingly the debt service ratio is based on gross annual income and the ratio hasn’t changed in decades even though taxes have increased by about 80% during the past 40 years.