Buying a place while in medical school

[quibble]

Have medical students ever thought of buying a place instead of renting? Can I use my LOC to buy a place?

[rmorelan]

6 minutes ago, lmck said:

Have medical students ever thought of buying a place instead of renting? Can I use my LOC to buy a place?

yes some have thought of it and some have even done it. 

It is not necessarily easy - and using the LOC in particular to get to a 100% mortgage effectively is problematic with some of the rules. Co-signers can help in some cases.

[quibble]

6 minutes ago, rmorelan said:

yes some have thought of it and some have even done it. 

It is not necessarily easy - and using the LOC in particular to get to a 100% mortgage effectively is problematic with some of the rules. Co-signers can help in some cases.

Let's say I have $275K of LOC and I hadn't intend to draw on it but for using it to buy a place. 

What are some of the rules? I know Scotiabank doesn't restrict you (restrict as in only letting you access $85K in year 1, etc.) and you have full access to the $275K in the first year.

[rmorelan]

well assuming you can buy a house worth 275K - which is relatively a small amount for house in most cities with a medical school (but not all). 

and assuming you have some way of paying the interest on that LOC for the next 3-4 years as well, and have the closing costs, can cover the up keep, property taxes etc etc, and have another means for the tuition you could do that. 

most people that do this would want to still have access to the LOC so would somehow obtain a separate mortgage and use the LOC to pay it off etc. Effectively the same thing but has great flexibility. Also the mortgage being tied to an asset can be worth more than the LOC amount.

Flexibility is important - often the entire process can take 10 years or so, and you don't fully know what will happen in that time

 

 

 

[Snowmen]

I looked at buying a condo but ended up not doing it for a few reasons:

1) Spending 150k or whatnot on a condo left way too little leeway IMO for the rest of my expenses especially since my school basically requires a car.

2) The interest and condo fees made it barely cheaper than renting in my particular city and it was a big gamble considering the current housing market. If the inevitable crash happens before you sell it back, you'll lose a ton of money.

Basically, wasn't worth it and too much of a risk at this point. Once I start residency and get access to a mortgage I can pay with actual money (instead of money from the LOC leading to paying interest twice), I'll definitely be buying something.

[Mithril]

I thought about buying a condo while in med school, but for the aforementioned reasons I decided it would be too financially risky as well. After residency is over money comes in very quickly and you should have no issues being approved for a large mortgage.

1 hour ago, Snowmen said:

If the inevitable crash happens before you sell it back, you'll lose a ton of money.

Ha, this has been said since I was still in undergrad and even before that. Who knows if it'll actually happen.

[jlkhhylyiluh6]

what happpens if you match to a different city though? Selling a house/condo can be a huge pain in the ass, and if youre time pressured due to residency starting (and potentially buying a place where you matched) you might be looing at selling at a loss. Just doesnt seem worth it if your life can drastically change in 4 years.

[JohnGrisham]

A few upperclassman, now residents bought back in their M1 with LOCs and made quite a bit if money off their condos. But this is Vancouver so no one knew that would happen for sure. At best they saved money on rent or broke even. 

[ArchEnemy]

On 2017-12-25 at 4:02 PM, JohnGrisham said:

A few upperclassman, now residents bought back in their M1 with LOCs and made quite a bit if money off their condos. But this is Vancouver so no one knew that would happen for sure. At best they saved money on rent or broke even. 

A few classmates of mine bought condos at the start of medical school as well. By the end of medical school, their condos had doubled or almost tripled in prices. This is in Toronto.

OP - it depends on where you are doing your medical school. Even with the full 275k, it will be difficult to find any real estate in downtown Toronto or Vancouver in that price range. 

[MDwannabe02]

I don’t know why anyone would want to buy real estate while in med school. Medical students have enough going on without having to estimate cost/benefits of buying a house and dealing with upkeep costs, maintenance, taxes, potentially having to sell once residency starts. Unless you have a LOT of family money, avoid buying AT LEAST until residency. Rent and focus on learning medicine. 

[goleafsgochris]

I knew a guy who bought in residency in Toronto. In a 5 year program I think he made like 300k on it over the 5 years.  The problem is he says it took so much out of his LOC that he ended up maxing it out, and needed to borrow ~20k against the cost of the place to pay for various things.  It sounded stressful but probably a good decision in the end depending on how you look at it?

[JohnGrisham]

4 hours ago, MDwannabe02 said:

I don’t know why anyone would want to buy real estate while in med school. Medical students have enough going on without having to estimate cost/benefits of buying a house and dealing with upkeep costs, maintenance, taxes, potentially having to sell once residency starts. Unless you have a LOT of family money, avoid buying AT LEAST until residency. Rent and focus on learning medicine. 

Reason being that you suddenly have access to 275,000 that can help finance a condo, and in big cities at least in recent memories, prices have gone up quite a lot. Even if they didn't go up that much, you'd break even at the very very worst once you consider 4 years of rent.   As far as fairly new condos and townhouses go, the upkeep over the short term and maintenance costs isn't all that onerous, if one was to consider the trade off of appreciation and putting your otherwise rental money to good use. 

Unfortunately 275,000 doesnt get you very far now for condos in big cities, as it did just 4-5 years ago.  

When condos in big cities were in the 200k-300k range, it was a very reasonable decision and doable without much extra family money. Now those same condos have doubled in price at a minimum, and it is not feasible to do anymore(but those that did, made quite a bit of money).

Times change, good for some, less so for others.



 

[rmorelan]

1 hour ago, JohnGrisham said:

Reason being that you suddenly have access to 275,000 that can help finance a condo, and in big cities at least in recent memories, prices have gone up quite a lot. Even if they didn't go up that much, you'd break even at the very very worst once you consider 4 years of rent.   As far as fairly new condos and townhouses go, the upkeep over the short term and maintenance costs isn't all that onerous, if one was to consider the trade off of appreciation and putting your otherwise rental money to good use. 

Unfortunately 275,000 doesnt get you very far now for condos in big cities, as it did just 4-5 years ago.  

When condos in big cities were in the 200k-300k range, it was a very reasonable decision and doable without much extra family money. Now those same condos have doubled in price at a minimum, and it is not feasible to do anymore(but those that did, made quite a bit of money).

Times change, good for some, less so for others.



 

yeah people see the money - both the LOC and eventually access to an additional mortgage and for many it is tempting to say - "well we should be able to do SOMETHING with this". Same temptation that lead many to invest in the stock market a bit with it as well. If you did that in the past several years it very likely would have paid off actually but of course you cannot predict such things (stocks go down, and yes real estate can also go down - as the late 2000s showed us in spades). 

On paper doing it now is less likely a good decision although no one knows anything for sure ha

[la marzocco]

Reviving this thread, I have some savings left over from my previous career and am looking to buy a place in Montreal where it is still reasonably cheap ~$300K for an apartment. Not sure what the process is, am I allowed to use my savings as a "down payment" and then use the LOC as a mortgage? Or would they not allow that? 

Also, I think home ownership won't implicate OSAP eligibility because they allow for a principal residence if you've been out of high school >4 yrs?

EDIT: In retrospect, I feel kinda stupid for not having done that right before med-1 and paid a year of rent.. but then again, I wasn't from the area so I was not familiar with locale etc.

[rmorelan]

2 hours ago, la marzocco said:

Reviving this thread, I have some savings left over from my previous career and am looking to buy a place in Montreal where it is still reasonably cheap ~$300K for an apartment. Not sure what the process is, am I allowed to use my savings as a "down payment" and then use the LOC as a mortgage? Or would they not allow that? 

Also, I think home ownership won't implicate OSAP eligibility because they allow for a principal residence if you've been out of high school >4 yrs?

EDIT: In retrospect, I feel kinda stupid for not having done that right before med-1 and paid a year of rent.. but then again, I wasn't from the area so I was not familiar with locale etc.

you can use your savings for the downpayment (ideally 20%) then get a regular mortgage for the rest. The effect is the same in terms of total debit but you have more flexibility as the LOC is still free. For doctor types the mortgages are often quite flexible (not quite an open mortgage where you can pay off whatever whenever but may let you pay 20% a year if desired.)

I believe you are right on OSAP - they don't count your house as an asset.

[la marzocco]

12 minutes ago, rmorelan said:

you can use your savings for the downpayment (ideally 20%) then get a regular mortgage for the rest. The effect is the same in terms of total debit but you have more flexibility as the LOC is still free. For doctor types the mortgages are often quite flexible (not quite an open mortgage where you can pay off whatever whenever but may let you pay 20% a year if desired.)

I believe you are right on OSAP - they don't count your house as an asset.

Gotcha. I will need to discuss with my bank about this. I am not sure if the federal stress test implemented on 1 Jan this year will allow me to do that if I can't demonstrate +ve income.

[rmorelan]

17 minutes ago, la marzocco said:

Gotcha. I will need to discuss with my bank about this. I am not sure if the federal stress test implemented on 1 Jan this year will allow me to do that if I can't demonstrate +ve income.

sure - a say 240K mortgage is not that high so the stress test probably won't get too bad. You would have to prove you could pay roughly a 1500 dollar a month mortgage as I understand it. 

[F508]

I would recommend that you carefully consider your situation before buying. It would probably make more sense if you have kids and a significant other pulling in income. There's so much uncertainty with residency. What if you want to apply for a competitive specialty and you don't match. Taking a year off and having the pressure of a mortgage to pay is a huge stress. Apparently banks will ask you to start repaying your LOC if you're not a full-time student anymore. Do you plan on staying in Montreal? Buying a place and then reselling in 3 years might actually result in a net negative plus a lot of hassle