First Time Home Buyer’s Perfect Market

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There is no time like the present for people to buy their first home.

It’s safe to say that the Central Alberta real estate market is perfect for the buyer. The statistics are showing a slowdown in sales and an increase in listings. An oversaturation of the market tips the scales in the buyer’s favour.

People who are trying to sell their home might receive a lower offer than they would have in the past. It also means their next home should come in at a cheaper price tag as well, creating a balance in the end.

For recent college graduates, renters, or people looking to move out, it’s a pinnacle situation for those trying to enter the market. In most markets across Central Alberta, the prices are the lowest since the 2008 boom, and likely won’t be getting much lower. Add in a low interest rate from the bank and it’s a prime time for first home buyers.

As we wrote before, a mortgage payment does not equal a rent payment. Depending on the property, a home buyer could be responsible for condo fees, taxes, insurance, electricity, water and other such payments. These expenses have been added to the monthly total to give a complete look at the cost of each home.

For the most part, there are three different options a potential home buyer could look at in the Central Alberta real estate market. A general guideline places a condo at a $200,000 value, a townhouse at $250,000 and a single family home at $300,000.

It may seem daunting, but what the numbers show is that buying their own property is a realistic choice for younger people, and a smart way to invest their money going forward. An average rental rate in Alberta is around $1,400 a month for a two-bedroom apartment. Each of the three home buying options are significantly cheaper than that price.

There may be significant differences in prices between the three options, yet the more spent, the more advantages there are for a homeowner.

Let’s start with the condo. At 2 bedrooms and 2 bathrooms, it would be easy to bring in a roommate to help pay the bills. Charging a tenant an average rent of $700 a month would decrease the rest of the bills to less than $650 a month. They would gain equity on their home every month and when it’s time to sell, they would be able to recoup a large amount of their money. A new homeowner would also be paying down their own mortgage, not their landlord’s.

Moving up to a townhouse would see the bill payments increase by $200 to around $1,530 a month. With the extra bedroom, an extra tenant is an option. Charging them around $700 a month would see the homeowner’s contributions drop to less than $150 a month, while still gaining all the benefits like building equity and recouping the money when the home is sold.

The single family home would cost around $1,850, about $300 more than the townhouse. Most single family homes start at two to three and a basement. By bringing in two roommates at $700 a month each, it would only cost $450 more to pay the monthly household bills. It’s a larger portion than a townhouse, though a house comes with more space, more privacy and gain equity at a quicker rate.

Each option comes with its own pros and cons, but the numbers help show that home owning is a smart option for most people, compared to spending money on the landlord’s mortgage. Ultimately, a first-time home buyer should stick to what they can comfortably afford.

Condo
(200,000) 900 sq. feet

2 Bedrooms, 2 Bathrooms
Down Payment — $10,000
Mortgage — $869
Condo Fees — $315
(Based on $0.35 a square foot, typically includes all utilities)
Taxes — $143.03
Insurance — $37
Water/Sewage — NA
Electricity/Natural Gas — NA
TOTAL: $1,364

Townhouse
(250,000)

3 Bedrooms, 2 Bathrooms
Down Payment — $12,500
Mortgage $1,087
Condo Fees — NA
Taxes – $178.75
Insurance — $63.5
Water/Sewage — $100
Electricity/Natural Gas — $100
TOTAL: $1,529.25

Single Family Home
(300,000)

3 Bedrooms, 2 Bathrooms
Down Payment — $15,000
Mortgage — $1,304
Condo Fees — NA
Taxes — $214.50
Insurance — $69
Water/Sewage — $100
Electricity/Natural Gas — $150
TOTAL: 1,837.50

This breakdown is meant as a general guideline. There are condos available for just over $100K, just like there are townhouses starting at over $300K. Check out our property search for full Central Alberta listings.

The numbers provided are based on a 25-year mortgage, with a 2.69% interest rate and a 5% down payment. Mortgage payments were provided by a CIBC Mortgage Calculator, tax numbers were taken from The City of Red Deer website, and insurance total taken from online house insurance quotes. These numbers are not official and are meant as a rough estimation of total costs.