How Vancouverites Can Bridge the Price Chasm and Upgrade from a Starter Home

Atrina Kouroshnia
October 20, 2015

Rising real estate prices in major Canadian cities, especially Vancouver, have many experts and homebuyers stressed about if and when buyers will be able to swap their starter home for a larger place. In my experience, it’s certainly more expensive to buy a larger home, but it’s not out of reach for many buyers.

Rising real estate prices in major Canadian cities, especially Vancouver, have many experts and homebuyers stressed about if and when buyers will be able to swap their starter home for a larger place. It’s certainly more expensive to buy a larger home, but in my experience it’s not out of reach for many buyers.

I’ve observed that most homeowners decide to upgrade when their income allows for it. As a single buyer who purchased a one-bedroom condo in your twenties, you may find that with, for example, the second income of a partner, more income in your thirties as you move up in your career and hopefully some appreciation from your starter condo, moving up to a larger home is doable. Even just having two out of three of those factors would help.

Let’s look at some numbers. The benchmark condo price in Greater Vancouver is just over $400,000. Based on a five per cent down payment and five-year fixed mortgage at 2.59 per cent, the monthly payment on a condo would be $1,781 including mortgage insurance. So what happens if you want to move up into a single-family home? The average detached home price in Vancouver is just over $1.1 million, so if you were to use the same term and interest rate, the monthly mortgage payment would be $4,898. That’s a difference of over $3,000 per month, which does sound like an unachievable payment gap. But fortunately, these numbers would be inaccurate in a real-world situation.

To buy a home at that price point, you’d need a down payment of at least 20 per cent (at least some of that might be equity from the sale of the starter condo and savings, the rest would likely come from a partner’s own equity or savings, or family assistance), which would help reduce the monthly payment. Since you’re putting down at least 20 per cent, you don’t need to pay for mortgage insurance and you aren’t constrained to a 25-year amortization. Choosing a longer amortization would also reduce your monthly payments. Using the same 2.59 per cent rate with a 20 per cent down payment and a 30-year amortization, monthly payments are reduced to $3,500 per month. If you were going with one of the few lenders that offer 35 years' amortization, your monthly payment would be further reduced to $3181. That’s less than double the payments on our starter condo example, which is achievable if two of you are paying the mortgage.

In addition, many detached homes in the Greater Vancouver area do come with a self-sustaining suite, which can be a great mortgage helper.

It’s important to point out that a couple or an individual buyer who wants to start a family might choose a detached home in a more affordable suburb rather than staying in the heart of the city, which of course reduces housing costs even further. Another important factor to consider is interest rates are lower than what they were five years back. Therefore the cost of upgrading has become more manageable for many households.What’s more, most people tend to upgrade to a bigger apartment or a townhouse before buying into a single detached home, so the price jump would be even less dramatic.

Even if you don’t have the down payment to make a single-family home possible, an upgraded condo or townhome priced between $500,000 and $650,000 can be well within range for many dual-income households. Along with the equity built, and hopefully some appreciation of their property if each party can put down 10 per cent, they can avoid the insurance premium and take advantage of a 30 years’ amortization. For a $600K home, using the same rates as in our earlier examples, payments are reduced to $1795 per month.  If the 20 per cent is not within reach, even a combined 5 per cent down payment each, and 25 years’ amortization, would have payments of $2500 per month.

While there is no doubt that upgrading from a starter home is expensive, it’s not always as impossible as it might seem, so getting the numbers up front and knowing the rules is crucial. Like I always emphasize, budget should be the number one priority. Speak to your mortgage broker and crunch the numbers to see what price point makes sense for you and when it would be a good time for you to transition out of your starter home.

Atrina Kouroshnia
Atrina Kouroshnia is an independent, licensed mortgage broker in British Columbia (see her website She specializes in helping first time home buyers own their first home and invest in their future. She has a degree in Human Relations and Commerce, and past work experience in human resources and real estate development have provided her with solid problem solving and customer service skills.