What you need to know before buying your first home in Kamloops or the Okanagan
Sky high real estate prices over the last few years have kept many first-time home buyers out of the market.
Even if they have the typical, or median, household income in Kamloops or the four major Okanagan cities, there’s not a lot of options.
Basically, it's small or older condos or manufactured homes that will fit that budget unless you can scrape together a big down payment.
“What we’re having to do with our clients is, they either have to look for a co-signer or they might need to get some family to help contribute more down payment,” mortgage broker Aaron Marsh, with Rampone-Marsh Mortgages, told iNFOnews.ca. “We’re seeing more gifted down payments than ever, especially in the last year. There’s been a ton of transfer in wealth.”
There are only three ways to come up with a down payment, he said.
One, of course, is to save the money.
That can be tough, but new legislation will allow people to save up to $8,000 per year for five years in the new Tax-Free First Home Savings Account.
It allows people to save up to $40,000. The money is tax deductible when it’s saved and no taxes are taken off when it’s spent on a home.
People can start making contributions on April 1.
Another way to get the down payment is to draw a maximum of $35,000 from a registered retirement savings plan. That has to be paid back over time, increasing the strain on a relatively modest income.
A co-signer can increase the amount of a mortgage a person qualifies for by, essentially, upping their income. But, that co-signer is on the hook to make the mortgage payments if the buyer reneges.
The other option is a straight out gift.
“That’s where we’re seeing a lot of parents starting to co-sign for their kids or increase the gift down payment to help them out,” Marsh said. “You really have to have a strong household income in order to qualify for anything decent.”
READ MORE: Small group of multiple homeowners control 29% of Kamloops, Kelowna markets
Another way to bring down the monthly payments is to increase the down payment amount. If it’s 20% or more, mortgages with 35-year amortization periods will lower the monthly cost.
While the down payment is key to buying that first home, there are other upfront expenses that have to be taken into account, like taxes and legal bills, that can cost upwards of $10,000 or more.
Since these entry level homes are mostly condos or manufactured homes, strata fees and pad rentals also have to be considered.
There is also the stress test that pushes the mortgage interest rate up two percentage points.
The mean household income varies widely amongst the region’s five largest cities, from a low of $68,000 in Penticton to $99,000 in West Kelowna, according to Statistics Canada’s 2020 data.
Housing prices also vary widely, from a typical condo price of $360,000 in Kamloops all the way up to $503,000 for a similar unit in the Central Okanagan. And it’s those typical, or benchmark, prices that the average household can afford.
Here’s how it breaks down from north to south.
KAMLOOPS
The median household income was $88,000 in 2020. Take off $2,000 for strata fees and, with a 5% down payment, that household can afford a $460,000 home.
This amount is based on the mortgage calculator on the Rampone-Marsh Mortgages website but, Marsh said, there are many different calculators out there that can produce different results.
The cheapest home listed in Kamloops, according to Realtor.ca, is a $99,000, 3 bedroom, one bathroom manufactured home. It has 843 square feet and comes with a monthly pad fee of $531.
Similar units are available in the other cities.
But, keeping more in the lines with what the average household can afford is a one bedroom, two bathroom, brand new 960 square foot condo in the Summit Point complex at 1405 Springhill Dr. for $455,000. It has strata fees of $189.33 a month.
The next closest listing is for $449,900 and is two bedrooms with two bathrooms and 1,036 square feet at 975 Victoria St. It has a strata fee of $394.98 per month.
VERNON
The median income in Vernon was $73,500 which drops the affordable home price to about $376,000.
For $375,000, a Vernon buyer can get a two bedroom, two bathroom 1,001 square foot condo in the Vintage Terrace complex at 3929-22 Ave. It was built in 1992 and comes with monthly strata fees of $379.41.
KELOWNA/WEST KELOWNA
Given the closeness of the two cities, the market there is essentially one market. But the household incomes vary greatly.
In Kelowna, the median household income was $82,000, which makes a $425,000 condo affordable. By contrast, the median household income in West Kelowna was $99,999, boosting them into the $522,000 range.
In Kelowna, a two bedroom, two bathroom 964 square foot condo at 875 Badke Rd. in the Rutland neighbourhood is listed for $425,000. That was built in 1980 and comes with $293,93 in maintenance fees.
Assuming the West Kelowna buyer wants to stay in that city, the closest listing to their $522,000 maximum is a three bedroom, two bathroom, 1,508 square foot home at 1835 Nancee Way Ct. for $514,900. While it’s larger than the condos listed above, it is a manufactured home that was built in 2018. The amount of monthly pad rental fee is not included in the listing.
An alternative is a $514,900 townhouse at 2433 Ingram Rd. with three bedrooms, three bathrooms and 1,980 square feet. It was built in 1989 and has maintenance fees of $540.78 per month.
PENTICTON
This is where the price point drops to its lowest in the region.
The median household income there was $68,000 in 2020, putting the maximum house price at $345,000.
The closest listing below that price is a $330,000 condo with two bedrooms, two bathrooms and 1,297 square feet at 187 Warren Ave.
It was built in 1986 and has monthly strata fees of $364,30.
OTHER COST CONSIDERATIONS
As mentioned above, it takes more than a 5% down payment to buy a home. There are numerous other up front costs.
A good outline of those costs can be seen on Vancouver’s Bridgewell Real Estate Group’s website, here. It was written by realtor Mariko Baerg.
The list includes:
Property Appraisals for $300-$450 plus GST.
Home Inspections at $300-$600 plus GST.
Legal Fees of $1,000 to $1,500
Title Insurance, which is sometimes included in the legal fees but could add $250-$400.
Strata Documents for $100-200
Strata Move-in Fee can be $100-$300
Property Transfer Taxes are 1% on the first $200,000, 2% on the portion of the fair market value greater than $200,000 up to and including $2 million. That is $6,000 on a $400,000 home.
GST is generally only applicable on newly-built homes.
Other costs include home and fire insurance, property tax adjustments along with strata and utility fee adjustments as well as utility connection charges.
Those costs don’t include moving expenses, the cost of changing locks, repairs and any renovations and décor costs.
“One of the biggest benefits of hiring a realtor is that we know the ins and outs of buying a home and having someone to guide you through the costs of purchasing, but also exemptions and options that could save you money,” Baerg wrote.
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