Finances, age, credit contribute to home ownership: Statistics Canada

Christy Bergen

Few Canadian young adults purchase homes, for a variety of reasons — but mostly financial ones, according to a Statistics Canada study published last week.

In Canada, six out of every 10 young people aged 25 to 39 in Canada who did not live with their parents owned their own home in 2006, according to the study.

Home ownership rates were highest in rural areas (71 per cent) and lowest in Montreal (48 per cent).

Three-quarters of young adults reported that home ownership was important to them.

Earlier Statistics Canada reports stated that Canadian young people are increasingly choosing to stay in school longer, postpone marriage, family, and even career, and remain living at home as long as possible.

Trevor Tussier and Darlene Stewart, account managers at Assiniboine Credit Union said they have not observed any noticeable difference in the number of mortgages granted to young people.

According to Stewart, “We have lots of young people applying for mortgages,” she said, but “there are still a lot of young people that qualify.”

The report states that income is the most important factor in home ownership among young Canadians, with ownership ranging fro 22 per cent among those who make $30,000 per year or less to 79 per cent among those who make more than $100,000.

“It’s hard for students [to get a mortgage] because they don’t have any credit,” Tussier said.

As Tessier pointed out, a good credit rating usually qualifies you for a mortgage. But a lot of young people, once they leave school, have no credit rating. Student loans aren’t counted towards a credit rating until a student begins to repay them, and

Even if you’re not earning a big salary, he says, “You can make very little and still have a good credit rating.”

According to Tessier, being approved for a mortgage depends less on how much you make and more on your debt ratio. Lenders expect potential home buyers to spend no more than 30 per cent of their gross annual income on their mortgage payments, heat, and taxes. But you still might be denied a mortgage if your total debt ratio — the percentage of your income that is required to cover housing costs, car and credit card payments — exceeds 42 percent of your gross income, according to“Homebuying Step by Step,” a report published by the Canada Mortgage and Housing Corporation.

Traditionally, the biggest reason potential young homeowners were discouraged from purchasing homes was coming up with the initial down payment, Tessier said.

Financial institutions required at least 20 per cent of the total cost of a home as a down payment. But in 1999, the Canada Mortgage and Housing Corporation made it possible for firsttime homeowners to get a mortgage with only 5 per cent down.

Currently many financial institutions, including Royal Bank and Bank of Montreal, offer no-downpayment mortgages, according to their websites.