Housing too expensive? There are other options...

Turn on the local news and you'll usually hear something about how unaffordable housing is in Saskatoon.  With the average house selling for around $350,000, that requires an income of about $75,000 to be able to support that mortgage, assuming you NO other debt!  The average household income is close to $90,000 in Saskatoon, so the average home is affordable for the average family.  However, if you're a single income family, or if you have other debt, the average priced home becomes unattainable.  You now have three viable options:

  1. Make more money - you could ask for a raise, find a new job, work a second (or third) job
  2. Buy a home at a lower price point - this may mean moving to a less desirable location or buying a home that  needs some work
  3. Continue renting - there are times when it is more affordable to rent and home ownership isn't for everyone.

Of course it would be nice if we all didn't have to worry about making concessions on buying a home, but there are other options to consider.  

In most of the newer areas in Saskatoon like Evergreen, Rosewood and Kensington, they are now building homes with separate entrances to the basement for access to a potential Legal basement suite.  When done right, a basement apartment can earn enough money to cover the majority of the mortgage!  For example, let's say the house is worth $500,000, which is much more than the average of $350,000, but hear me out.  Your mortgage payment (assuming 5% down and current 2.85% interest rate) would be a little over $2200 per month.  With an additional $1200 per month, generated by the income suite, you would be paying only $1000 of your mortgage, which is equivalent to having about a $215,000 mortgage!  Essentially, by going this route, you are taking care of #1 and #2 above and allowing someone else to take #3's route!  

Of course, there are some drawbacks to renting out a portion of your house that I have discussed in a previous blog post.  But for a first time buyer looking to break into the real estate market, it is definitely worth checking in to.  

You may be thinking "That's great, but I'm having a hard time getting approved for a $350,000 mortgage, how do you expect me to buy a house for $500,000?".  Valid question.  The great thing about LEGAL basement suites is that the income generated can be factored into your income to increase the amount you can borrow.  An extra $1200 per month is $14,400 extra income per year.

If you don't already know, this is the route I took when I started in my real estate quest.  I bought my first home at the age of 21 and I lived in the basement of my home and rented out the main floor to cover the entire mortgage.  Of course, at that time, my interest rate was 5.85% rather than the amazing 2.85% rates that are out there now.  If you'd like to hear how I did it, or figure out if it's right for you, drop me a line!

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