Is it Better to Pay Down Your Debt Load or Save For a Home?Apr 30, 2019
Ready to put down roots but your debt load is weighing you down? That’s how a significant number of Canadian millennials are feeling these days. Although they may be ready to hit those important milestones like buying a house, starting a family or getting married, there are financial obstacles standing in the way. Below are a few ideas on how to narrow down your decision to keep renting and pay off debt or jump into the housing market.
What does affordable mean to millennials?
Job opportunities, reasonable housing prices and access to entertainment and amenities all seem to be what millennials are looking for in a city. And, it just so happens that Peterborough claims to have all those things. In 2017, it was even ranked as the 2nd best place in Ontario to buy real estate. While this may be true for GTA families who want to relocate to Peterborough, is the $419,000 average home price in Peterborough “affordable” for millennials who already live in the area? With a median income level that falls under $60,000, it might be difficult.
Check out this mortgage qualifier tool to see what affordable looks like on your budget.
Pay off debt, rent or buy? How to know what’s best for you
Single millennials might be in a tough spot as far as getting into the housing market since one income usually just isn’t enough to cut it (unless you’re thinking small). However, as a dual-income couple, more options are available. Here are a few questions you need to ask beforehand:
How much debt do we owe? More importantly, how do you both plan to deal with your debt? If you’re currently renting at a reasonable rate, now is the time to throw as much money as you can toward depleting those balances. This will give you more money each month to save for a down payment and likely get you a better mortgage rate due to a higher credit score.
What will our budget look like? As a renter, you may be thinking a mortgage payment may be a little more than rent each month, so all in all, not a big deal. You’d be wrong. On top of your mortgage payment, you’ll have heating and hydro costs, insurance, repairs and property taxes. And, if you’re within city limits, you’ll have a water bill to pay as well. And those are just the basics, which don’t include moving costs, lawyer fees or land-transfer tax. Further still, you have to consider those extras such as cable, internet, car payments and groceries.
Check out this Ongoing Housing Expenses Worksheet to help you figure out your monthly costs as a homeowner.
What are our goals? This is a topic that will take some time, so clear your schedule and spend an evening at home with your partner so you can get down to business. Do you plan to get married in the next few years? Vacation? Have children? How will you accommodate these extra costs? Will you take parental leave if you have children? Do you have a load of student debt to pay off? Use this goal worksheet and go over the details together. It might require some compromise on both sides, but it’s important you’re both on the same page before signing a mortgage contract together.
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