Living Root buy a first house in real estate overheating

Thomas* and Audrey*, aged 29 and 26, had planned to buy a house when they were finally having stable jobs.However, the couple reached this financial situation in 2020 ... at the same time as real estate madness and overbidding.

THE SITUATION

"We thought that when my spouse would be able to pay half the mortgage without eating tuna rods every night, we would start looking seriously to buy a house," said Thomas on the phone.

The young man is an engineer and has a stable salary, while his spouse is a self -employed worker.Although they want to pay the mortgage in equal shares, they do not intend to invest the same amount in funding.

Despite all their good intentions - they have liquidated all their debts and put money aside - the spouses fear that the current real estate market will derail their plan."We are already paying attention to our money and we say to ourselves: it is very good to want to fill this desire, but is it reasonable in the circumstances?Asks Thomas.

"If we put much more money than we had thought, will it harm us in the long term?Is it better to postpone this project?"Continues Thomas who claims to be, after all, well for rental.

Interested in the current trend of hasty retirement, they devoured the book Liberté 45 by Pierre-Yves McSween and would like to combine this dream with that of being owners.But is it possible?

"It’s attractive to us, but we don't know at what age nor at what amount would be appropriate," admits Thomas.

NUMBERS

Thomassalaire: $ 77,000 (3 % increase per year) No pension plan: $ 60,000 Celi: $ 63,000 not registered placements: $ 4,000

AUDREYSALE: Between $ 50,000 and $ 65,000 no pension plan: $ 12,000 CELI: $ 6,000 no debt

Cost of the couple's net: $ 60,000

THE ANSWER

Chantal Matos, Consulting Director at Management Privé Fund FMOQ, calculates that the couple can carry out their house purchase project provided that they have well evaluated their cost of living.

"The $ 60,000 must take into account all the costs of a house, such as taxes, maintenance, higher electricity costs, unforeseen events.If, in the budget they provided us, they did not take into account new costs, they are probably $ 10,000 or $ 15,000 from the real budget and they will have to wait a bit.»»

To make sure they don't have a too tight budget, Chantal Matos analyzed with a living cost of $ 65,000.

"If they buy, as they wish, a house worth $ 400,000 with 20 % funding, or $ 80,000, they will have a mortgage of $ 320,000.Considering the current rates of 2 %, I arrive at mortgage payment of $ 1,155 per month.»»

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Currently, fixed mortgage rates for 5 years vary from 2 to 2.49 %.

"The difference between the cost of their current rent of $ 950 and the mortgage is $ 405.These are the $ 5,000 that I added at their cost of living, "said consulting director.

If Thomas and Audrey make a purchase offer accepted at $ 400,000, as expected, they will absolutely have to use the home ownership regime (RAP) for the $ 80,000 funds.Thomas will be able to use $ 35,000 of his RRSPs, the maximum that is allowed per person.For her part, Audrey has $ 12,000 available.She could also transform the $ 6000 of her Celi into RRSP.However, she will have to wait 90 days before being able to "rape" them.

For the rest, the $ 27,000 can be taken in the CELI account or in the unregistered investments of Thomas.

“As they give 20 % of funding, they are eligible for a margin of mortgage combined with a mortgage.I would choose this option.It is money at a very low rate that they can use in the event of a glitch, like a roof to be redone, for example.It is better to take this option from the start so as not to have to go back to the notary a second time, which causes additional costs.»»

What about financial independence?

Their objective is to achieve financial independence, but they admit that they cannot put an exact figure in this concept.

"It is to reach as quickly as possible enough money so as not to be forced to work," defines Chantal Matos.This does not mean that they will stop working, but they will no longer have to say to themselves: "I absolutely have to win such a income to continue living until my old days."»»

The specialist planned that they could retire between 55 and 60 years.To get there, Thomas contributes $ 10,000 in 2021 and Audrey $ 6,500.Subsequently, Thomas must absolutely put the maximum of RRSP to which he is entitled every year.Audrey must also do the same in addition to contributing to the Régie des Réntes du Québec (RRQ).

As an autonomous worker, she must pay both the part of the employer and the part of the employee.

"It is certain that she must declare as much income as possible while being careful not to pay too much tax.But the more income she declares and she contributes to the RRQ, the more she will have a good rent later at 65 years.»»

The couple can buy a house if they are able to continue to put money aside, because neither Thomas nor Audrey have a pension plan, warns Chantal Matos.

By following this strategy, she calculates that the couple gives off a surplus of $ 4,000 per year that he can put in a Celi.

If the initial cost of $ 60,000 is not the right one, the couple cannot afford to buy a house.It is better to wait three to five years before embarking on a mortgage, time to accumulate a little more money or have a bigger income.

Chantal Matos, Consulting Director at Management Private Fund FMOQ

As for determining what is the right time to buy a property, this is a difficult issue, because the markets are still in the movement.The right question to ask is rather: is my financial health good enough to buy a property?CHANTAL MATOS believes.

"If you think your job is stable, your salary is stable, your business works and that you manage to put money aside, it is that your financial health will be able to support a mortgage and all the expenses thatleads to the purchase of a house.»»

Paying a house $ 100,000 more than it is worth a bright idea.

“The danger is to devote the majority of your income to the house.The day there is a glitch or a loss of job, we must then resign ourselves to sell it, "she concludes.

* Although the case highlighted in this section is real, the first names used are fictitious.

Did you plan a project that requires judicious use of your money?Do you have financial problems?