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Whoa!
It's a wonder any first-time home buyer can even get a toehold in the ridiculous Kelowna housing market.
A report by Point2.com, the international real estate portal, pegs the first year cost of homeownership in Kelowna at a logic-defying $216,563.
The report shows it will take a long, long 12 years for the first-time buyer in Kelowna to save up the $216,563 needed to embark on that suffocating first year of home ownership.
That's why many first-time homebuyers have to opt for the cheapest condo they can find to at least get into a home and into the market.
Or, first-time buyers get help from the bank of mom and dad.
"Becoming a homeowner is demanding as it is, but the first year of homeownership is a beast of its own," said Point2.com communications strategist Carmen Rogobete.
"For fresh buyers, the array of upfront and annual recurring costs is not just challenging but also daunting."
What goes into the first year cost is exorbitant, mainly the down payment.
The standard 20% in Kelowna is a hefty $150,817.
Even if a first-time buyer is lucky enough to qualify for 5% down for the portion of home cost below $500,000 and 10% between $500,000 and $1 million, the down payment is going to be steep..
The price of the home is the first factor, followed by down payment, closing costs, mortgage payments, homeowners insurance and property taxes.
For the Kelowna example, Point2.com used the median benchmark selling price of a home in January on the widely-used Multiple Listing Service.
That was $754,085 -- an average of the benchmark selling price for three types of housing -- single-family, townhouse and condominium.
If you break down the three types, the single-family benchmark in Kelowna is $976,800, a townhouse $741,600 and a condo $492,900.
As such, the Point2.com benchmark of $754,085 isn't ideal, but it is a good average to use as an example.
Anyway, moving on.
After buying that home in Kelowna for $754,085 and putting $150,817 down, the homebuyer is also faced with $15,843 in closing costs (property transfer tax, legal fees, home inspection and appraisal fee), a first year of mortgage payments of $45,716 (based on a conventional, five-year, fixed-rate term with 5.86% interest rate and 25-year amortization period), $924 homeowner insurance and $3,262 in property taxes.
Admittedly, the first year of home ownership is the most onerous because of the down payment and closing costs.
But, get past that first year and the annual total recurring costs are still $49,903 in Kelowna, taking into account mortgage payments, home insurance and property taxes.
Considering that an individual, couple or family should not pay more than a third of annual income on housing, the household income to carry that would have to be around $150,000, which is high.
However, once you get into the market for a few years, there's the beauty of home equity build up, which allows you to sell your first home and move up to a bigger and better place, paying the down payment with equity.
Of course, the most enormous first-year costs are in the cities with the most excessive house prices, such as Vancouver's $331,638 and Toronto's $315,031.
Conversely, the cheapest first-year costs are in cities where house prices are modest, such as Saguenay, Quebec's $74,342 and Trois-Rivieres' $79,517.
See the full report at: https://www.point2homes.
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