Our Starter Home

We purchased our first home several years after we married. It took a bit of time to build up our savings for the down payment. And we did it all ourselves — no help from parents or family. As you can see from the picture above, the home was a nice starter. The house cost $68,000 which was almost twice the income I was earning back in the 1980s.

The listing for the following house seems to suggest a similar type of home. It was built in 1931. It has about 2,500 square feet of living space on both levels. Not too bad for a smaller house. The lot is a bit tight at roughly 40 feet wide by 100 feet deep.

The asking price for this home? Almost 2 million dollars. The Vancouver property is being offered at $1,975,000. Assuming a $395,000 down payment, a 30-year amortization of the balance at 3.95% and the carrying cost of the mortgage is a mere $7,258 per month.

Given a debt service ratio of approximately 32% for Principal, Interest, Taxes and Heating, a young family would need to bring in over $300,000 per year in income — and only the top one percent in Canada earn that level of income. Of course, we need to consider that the interest rates may edge up again. Which would mean a higher income to carry a higher debt load.

Ah yes. A big mortgage on a small house. A really, really big mortgage.

3 replies
  1. Filipe
    Filipe says:

    Good post Richard, but what is the point you are trying to make with it in the end? Open for interpretation?
    One (of many) could be that the younger generations in today’s world are in many ways put in a much more competitive, stressful and unfavourable position than their parents, whose generation as someone on another blog focused on those issues alone said it before, were only required to get a diploma, then automatically be subscribed for a job for life and build their equity by just sitting in their living rooms and at the same time feel entitled to endlessly consume.

      • Filipe
        Filipe says:

        Yes, crazy indeed. But this is just a fact well known that everyine can feel. The question is the reasons behind it. And there are lots of them, but definitely not that incomes have grown so much since you last bought your starter home to keep the same price/income ratio.
        Some of the key reasons are government policies to keep interest rates artificially low, people’s sense of entitlement and poor money management and thinking that being in debt as something cool (young kids now would not want to buy your stater home. They want the granite, SS appliances and all the extras from the get go), HAM (Hot Asian Money), etc. etc. On the last point though, recently a Chineese student (in her ealry twenties) bought a tear down bungallow in Willowdale for over $1.5MM, paid in cash (no mortgage), outbidding 11 other bidders with offers above $1MM. So, who of the recent university graduates with a regular job, if they have one, would be able to compete with this, unless they take on huge piles of debt and enslave themselves for life.
        So, yes, crazy indeed …. but what do we do to change it. The younger generations would be very angry with us one day, I guess.


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