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Urban Mortgages on an Extreme Budget

Minimum-wage-mortgage-optionsEver wondered what kind of mortgage you can get on minimum wage in a big city?

Minimum wage in Canada ranges from $9.75 per hour in Alberta to $11 in Nunavut. In Ontario and B.C., it’s $10.25.

Using standard insured lending guidelines, someone earning even $11 per hour and working 40 hours a week could theoretically qualify for a $118,000 house.1

Out of curiosity, we searched every MLS listing within Toronto, Montreal and Vancouver city limits for such a property.

We figured it would be a tall order to find properties accessible to a near-minimum wage earner in these cities, and it was. Out of thousands of real estate listings, there wasn’t one home that was cheap enough for an $11-an-hour employee to get a typical high-ratio mortgage on.

Interestingly, Toronto had numerous condos that met the price criteria (some as low as $80,000). But the condo fees in each case lifted the gross debt service (GDS) ratio of our hypothetical applicant well above the 39% government-set limit. That would immediately dash the mortgage approval hopes of any such borrower.

min-wage-home-optionsWe also found a nice mobile home in West Vancouver, B.C. of all places—one of the most affluent locales in the country. But despite an $89,000 price tag, the obligatory monthly “pad rental” fee would jack up a minimum wage applicant’s GDS ratio and thwart approval.

In experiments like this, it quickly becomes apparent that employees at a subsistence-level income can’t go it alone when buying in our major cities.

For most near-minimum wage earners who don’t have down payment help, finding a co-applicant is often the only hope they have of buying in Canada’s biggest cities.2


1 Assumes good credit, 5% down, no other debt and a lender that’s comfortable with the borrower’s employment stability.
2 Down payment help can sometimes come from things like a family gift/loan or municipal housing programs.

Rob McLister, CMT