The Minimum Income Required to Purchase a Property
I often get questions from buyers about the minimum income needed to buy a property, so I’ve put together this guide to help. It includes Minimum down payment and income requirements for various property prices. I’ve also included an explanation of the mortgage multiplier and how it could be useful for a buyer.
Here’s a quick table showing the estimated down payment and required annual income for each price point:
Property Price | Minimum Down Payment | Household Required Income |
$380,000 | $19,000 | $87,000 |
$500,000 | $25,000 | $104,000 |
$600,000 | $35,000 | $123,000 |
$700,000 | $45,000 | $142,000 |
$850,000 | $60,000 | $170,000 |
$1,000,000 | $75,000 | $199,000 |
$1,200,000 | $95,000 | $241,000 |
Understanding the Mortgage Multiplier:
The mortgage multiplier shows how many times a household’s income can be used to determine the maximum mortgage a buyer qualify for. Based on the table above, the multiplier is approximately 4.5, meaning buyers can potentially afford a mortgage around 4.5 times their annual household income under these conditions. For example, a couple with a household income of 100K may qualify for a mortgage of 450K.
Please feel free to reach out if you or anyone you know needs more detailed information or additional assistance. I'm here to support you and your clients every step of the way!
Important Note:
If a buyer has a down payment of 20% or more, they may qualify for the same properties with a lower income requirement. These calculations can also vary based on factors like interest rate, amortization period, down payment, property taxes, condo fees (if applicable), credit scores, and specific lender requirements.
Assumptions for these estimates:
Interest rate of 4.39%, stress test at contract rate + 2%, 4% mortgage insurance, other debts payments less than 5% of the annual income, 0.7% annual property tax, $100/month heating, condo fees of $450 for the first property, GDS at 39%, TDS at 44%, 30-year amortization. All properties are freehold except the first one. Required income has been rounded to the nearest thousand.
