A lot of millennials are just finishing up college and wondering if they should dive into the housing market. Are you in this same situation? It might be stressful trying to figure out what you should do, especially if you have student debt that's built up from your education. It's important to know that you're certainly not alone, as a lot of recent graduates are in the very same situation. They want to invest so they can stop paying rent, but aren't sure if now is the time. If you need some perspective to make sure that you are ready for home ownership, take a look at Jack and Johanna's story initially shared by The Globe and Mail.
Investing After Graduating
After graduating college Jack and Johanna had $45,000 in student loans along with a $19,500 car loan. Naturally they were thinking about purchasing a home, especially since their household income totalled around $140,000. But before they started to look at places to call home, they decided to do some research on home buying tips and asked an expert if this was a financial move they'd end up regretting. That expert was Christine White, who is a money coach in Toronto who helps people maximize their investments and make smart financial decisions.
White determined that renting was going to be the best choice until the couple had their student debt paid off. And in order to pay that off, she recommended they put in a combined $1,600 per month towards re-payment. Under this plan they'd have their loans paid off in 2.5 years and would avoid paying thousands of dollars in interest as well. Are you thinking about doing the same thing? See the same benefits by paying off the highest interest loan first.
The next piece of top notch real estate advice from White was for the couple to take $50 from every paycheck and put it in a retirement savings plan. If each did this, then they will be able to withdrawal it in the future under the government's Home Buyers' Plan. This can be used towards a down payment, and both Johanna and Jack could retrieve $25,000 each, meaning a total of $50,000! And once the couple is ready to pull that money out and buy a home, they'll want to make sure they have at least 20% down so they can avoid mortgage loan insurance, which will only cost them more money. In order to make sure they have spare cash to cover that down payment, they should save the $1,600 per month they were paying towards their loan for a year or two.
Looking at Your Situation
If you're in a situation where you have student debt, take it from an expert and pay it off before you head out to buy a home in Calgary. This will free up a lot of your money so you can save more and do more once you actually have the keys to your home. This might take you a little longer to achieve, but it will be worth it in the long run, especially with the money you save on student loan interest.