Mortgage During Medical School

[UBCAce]

Hey All

 

I've searched the threads & found a couple of them that address my question but thought I'd ask again in case anyone has more advice/information. I'm a 3rd year med student currently doing my clerkship and I will be getting married this summer. My fiance & I are hoping to puchase a house/condo and were wondering what our options were for mortgages. I do have my LOC with RBC & will be contacting them as I've read in other threads that they do offer med students a mortgage based on a projected income of $150,000, however they do require a 25% down payment.

 

I'm wondering if any other medical students on this forum have secured mortgages and if so through which institutions? Any help would be appreciated!

 

TIA.

[JewelLeigh]

I have heard that Royal Bank will give a mortgage to medical students even without an income-earning spouse, though I haven't had to speak to them about this myself. My husband works, and I know that pretty much any institution that we have spoken to were willing to give us a mortgage that was based on my "projected income" combined with his current income - a sizeable amount more than we could afford based on his income alone.

 

However, just something to think about - are you sure buying a house the summer before CaRMS is a good idea? Do you know what you want to do and are you SURE that you'll get in to a location such that you wouldn't have to move? I just ask because CaRMS is stressful enough without throwing a recently purchased house into the mix I know several people in my fourth year class who own homes, but most of them have owned them for quite some time. Since it would only be a further 8 months or so after your wedding before you get your match, you might want to think about waiting. That said, if you fiance is already committed to your current location, I guess a house wouldn't really change your CaRMS strategy. Anyway...food for thought

[Kirsteen]

I have heard that Royal Bank will give a mortgage to medical students even without an income-earning spouse, though I haven't had to speak to them about this myself. My husband works, and I know that pretty much any institution that we have spoken to were willing to give us a mortgage that was based on my "projected income" combined with his current income - a sizeable amount more than we could afford based on his income alone.

Hi there,

 

Regarding RBC, I know that (in Toronto at least) their mortgage specialists are willing to give medical residents sizeable mortgages without an income-earning partner on the application. They do base this on your projected income and they take note of the specialty to which you've matched in order to help determine that, i.e., if you're looking for a larger mortgage then they will list your specialty (and it's average projected income) on the application. They do require a 25% down-payment, and if the mortgage is to be large, i.e., $700K or more then you need to have minimal additional debt in your name. If those stipulations are satisfied then they are quite willing to let you have $700K or more.

 

Cheers,

Kirsteen

[UBCAce]

Thanks for the helpful replies so far! Anyone else with anything to add?

[JayP]

I bought a house at the end of first year with a good friend of mine in Ottawa. We both have an income and I can pretty much guarantee you cannot get a mortgage anywhere based on what you are expected to make. I've heard people mention this before and I spoke with many different mortgage brokers and banks, and it simply does not happen. All these banks that advertise: "why rent when you can own?" should be more clear about what they mean. Just because we're medical students does not mean that we are entitled to some sort of special mortgage, you need to go through all the loopholes that everyone else does.

 

Those loopholes are you either have income or a cosigner and you have good credit and a good income/debt ratio. There is a formula they use in which they estimate (based on your monthly gross income) how much they are willing to give you. You can shop around but most companies will give you around the same amount for a mortgage with an interest rate that is close to prime, or just below. Make no mistake about it, owning your own place in medical school without considerable financial backing (e.g. parents) will just not happen. And when you think about it, why would it? That is a huge financial risk for a bank to take on you, and they don't make money by making foolish moves like that.

[coastalslacker]

Just to reiterate what someone else already mentioned-are you sure buying a house with Carms coming up is a great idea? If you do have to move, you're pretty much guaranteed to lose money on real estate commission alone. A classmate of mine bought a house in 3rd year, which our class pretty much unanimously regards as a bonehead move.

 

Personally, my wife and I were lucky enough to use the 'rents to secure a great mortgage rate. Obviously this isn't an option for everyone.

[mrgreek]

Hey All

 

I've searched the threads & found a couple of them that address my question but thought I'd ask again in case anyone has more advice/information. I'm a 3rd year med student currently doing my clerkship and I will be getting married this summer. My fiance & I are hoping to puchase a house/condo and were wondering what our options were for mortgages. I do have my LOC with RBC & will be contacting them as I've read in other threads that they do offer med students a mortgage based on a projected income of $150,000, however they do require a 25% down payment.

 

I'm wondering if any other medical students on this forum have secured mortgages and if so through which institutions? Any help would be appreciated!

 

TIA.

 

I don't think you give enough information in your post. Are you debt free? Do you plan on doing residency at UBC (I assume thats where your from) no matter what, as long as you stay there? $150,000 seems like a lot in some markets (in terms of real estate) like out east or central Canada, but UBC? Damn, I don't want to know the average price of a house in the unfavorable parts of the city...

[JewelLeigh]

I bought a house at the end of first year with a good friend of mine in Ottawa. We both have an income and I can pretty much guarantee you cannot get a mortgage anywhere based on what you are expected to make. I've heard people mention this before and I spoke with many different mortgage brokers and banks, and it simply does not happen. All these banks that advertise: "why rent when you can own?" should be more clear about what they mean. Just because we're medical students does not mean that we are entitled to some sort of special mortgage, you need to go through all the loopholes that everyone else does.

 

Those loopholes are you either have income or a cosigner and you have good credit and a good income/debt ratio. There is a formula they use in which they estimate (based on your monthly gross income) how much they are willing to give you. You can shop around but most companies will give you around the same amount for a mortgage with an interest rate that is close to prime, or just below. Make no mistake about it, owning your own place in medical school without considerable financial backing (e.g. parents) will just not happen. And when you think about it, why would it? That is a huge financial risk for a bank to take on you, and they don't make money by making foolish moves like that.

Because I am a medical student, my mortgage broker was willing to finance a loan that was $100k more than our income would normally allow, based on projected income, so long as we had a 20% down payment. The 20% down payment allows the bank to bypass several governmental rules dictating the amount of your mortgage and other things such as insurance.

 

I'm not sure why you think it is a huge financial risk for a bank to give a medical student a mortgage. Given that the failure rate out of medical school is minimal, and the average income of physicians in Canada is significantly higher than the average Joe, I think it is actually quite a low risk move. Any Canadian medical student with good credit can obtain a $150k unsecured, no cosigner line-of-credit....at least with a mortgage, the bank has collateral! That said, without any income (spouse or self), I agree that it is very difficult to obtain a mortgage. However, I know several people who purchased homes during medical school, using mortgages that combined their current income (a summer job!) and their projected income as a physician.

 

So...agree that there are some loopholes which everyone, medical students included, must jump though, but disagree that medical student can't get mortgages based on projected income.

[CW VW]

I just wanted to add a little bit.

 

I am a third year medical student and I bought a house in second year with absolutely no income. I didn't even have a summer job between 1st and 2nd year. Royal Bank gave me a mortgage with no troubles...no co-signer. They based it on future earnings of $150K. So I guess medical students are entitled to some sort of special mortgage.

[JayP]

It's obvious that RBC is the exception to this rule. It is a huge financial risk for any bank to give a mortgage to someone without an immediate income (and LOC doesn't count as immediate income), irregardless of projected income or not. NB, CIBC, and other LOC providers wouldn't entertain the idea at all. Why do you think that is? If you found a mortgage broker who was willing to give you a mortgage based partly on projected income, then you are fortunate. Maybe it's demographics, but I contacted many different brokers in Ottawa and TO and they simply told me they cannot give me a mortgage based on projected income as a physician.

[JewelLeigh]

I still don't really understand why you think it's a huge financial risk to lend money to people who are virtually guaranteed to become top wage earners during the early course of the mortgage term, and with the collateral of a house... Do you thus think that banks giving huge unsecured lines of credit to medical students is also a huge risk?

[optimist]

Hi,

 

I am a first year medical student. I was able to get a mortgage without any income, and I did not have to put anything down, although I did put down 10%. I got it through RBC, but I did have to wait for a bit. The guy's name was Darren Keatings and he works out of Ottawa. If you have any questions, let me know.

[BlackJack]

I still don't really understand why you think it's a huge financial risk to lend money to people who are virtually guaranteed to become top wage earners during the early course of the mortgage term, and with the collateral of a house... Do you thus think that banks giving huge unsecured lines of credit to medical students is also a huge risk?

 

A medical student who is in debt because of an LOC and student loans is a poor candidate for a mortgage. Banks know that physicians do not make much income through residency; heck, if you count it per hour residents sometimes make less than minimum wage. Seeing as how these residencies are anywhere from 2 to 7 years, and that's a lot of time to not be getting full payments.

 

Additionally, the wage of an FP, which most medical students end up doing, is approximately 80-90k/yr after overhead and taxes. Sure, this is more than the national average income, but when it the 200k LOC/student loan debt is factored in, it really isn't that much. If a bank were to add another 150-300k on top of that debt in the form of a mortgage, you're looking at a half-mil(!!), and that kind of debt would never be paid off with a paltry 80-90k/yr.

 

 

 

My personal opinion is to avoid accumulating huge amounts of debt. If you can avoid an LOC, avoid it! If you can avoid a mortgage, avoid it! The current real estate market is going to crumble soon anyway so I'd steer clear of home ownership at the present time.

[webshy]

If I get into med school in September, whether it be in Halifax or Kingston, I plan on purchasing a condo to live in, rather than renting for four years. (In fact, I'm going condo shopping in Halifax this weekend, not to buy but to get an idea of what is out there, so that I can potentially buy quickly should I get an acceptance in the summer.)

 

I spoke with my financial advisor at my bank (TD), and he told me that I won't have any trouble getting a mortgage as a medical student. True, I will have a sizable down payment, since I've been working for 9 years. However, I won't have any income (or limited income, should I choose to work part time) during the year. Mark told me that he would give me a mortgage at or below prime, despite the lack of income, just because I'll be a med student (speaking positively here!).

 

Elaine

[webshy]

Elaine -

 

Do you know what the parking is like at the Dal/QEII complex?

 

Buffy PGY-5 pass pass I gotta pass

 

No idea. Whenever I've been in downtown Halfax, I've travelled by foot, except when I went to my Dal graduation program a few years ago (distance ed program).

 

Elaine

[Dal07]

Parking around campus is very limited. When I went to Dal for my undergrad I bought a parking pass but they sell more passes than there are spots, so unless you got there at 8 am it was extremely hard to find a spot (unless you purchased a 'reserved' spot, which costs something crazy like $800 if I remember correctly)

 

Now I work at the IWK, (right across the street from Dal Med), and the parking situation is still bad. Most of my colleagues park a few blocks away and have to move their cars every 2 hours to avoid getting a ticket, or they pay about $10 a day for the general lot, because staff passes are very hard to get.

 

I live downtown, so I don't need to drive ...

[JewelLeigh]

Additionally, the wage of an FP, which most medical students end up doing, is approximately 80-90k/yr after overhead and taxes. Sure, this is more than the national average income, but when it the 200k LOC/student loan debt is factored in, it really isn't that much. If a bank were to add another 150-300k on top of that debt in the form of a mortgage, you're looking at a half-mil(!!), and that kind of debt would never be paid off with a paltry 80-90k/yr.

I disagree. First, only 1/3 of medical students go into family medicine. Second, even for those who do, most will end up with a partner, and thus will have two incomes. Third, I dunno who rings up 200k in LOC/student loan debt, but they must be ridiculously huge spenders. I would expect that most people who spend reasonably during medical school will end up with ~100k, maybe $150k if they have debt from undergrad and I suppose $200k if they didn't work during the summers and spent a LOT of money on fun stuff like travelling (not that there's anything wrong with that!) Fourth, 80-90k after tax is still ~$7000/month take home! Even if the other arguments I mentioned are not true, (i.e. student without a partner who goes into family med, actually has $200k student debt and purchased a $300k house), they could still pay it off in 25 years at just over $3k a month, leaving a full $3-4k per month for other expenses. Not ideal, but certainly not impossible.

 

During medical school, payments can be (and I suspect are) made from the LOC - the banks don't care where they get their money, as long as they get it! Medical students use their LOCs to pay for housing - regardless of whether it's in the form of rent or a mortgage. It's not a heck of a lot different from using your LOC to pay the monthly interest on your LOC - seems silly, cause it's all debt, but if the bank gets their payment, again, they don't care where it came from.

 

I'm not advocating for everyone to go out and buy houses and spend extra money. However, I believe there are many people out there securing mortgages without hassle who are far riskier from a financial investment point-of-view than med students. As future physicians, medical students also have the advantage in that as individuals, we are potentially profitable clients to procure. Not only are we likely to end up as high end wage-earners from a personal persepective, but we will often incorporate, have employees and other medical practice-related business that a bank would likely be happy to take on.

 

My personal opinion is to avoid accumulating huge amounts of debt. If you can avoid an LOC, avoid it! If you can avoid a mortgage, avoid it! The current real estate market is going to crumble soon anyway so I'd steer clear of home ownership at the present time.

Having said all of the above, I still completely agree with you on your last point...which is why I'm still renting a small apartment, driving an incredibly beat-up car and living as cheap as possible!

[JewelLeigh]

Elaine -

 

Do you know what the parking is like at the Dal/QEII complex?

 

Buffy PGY-5 pass pass I gotta pass

 

Depends where you need to go and for how long.

 

If for a day only - Dalhousie University - as Dal07 said, very difficult, street parking for 2 hour max if you're lucky. QEII -the VG has a big outdoor parking lot, but from what I've seen, it's usually full pretty early in the day on weekdays...the HI has an above-ground parking complex that I think (but definitely not sure) has reasonable availability during the days. Both of these options are likely to be pretty expensive. IWK - also an above-ground complex, but again, expensive, and I think fills up quickly.

 

If long-term parking needed - best to contact the QEII directly and ask about the particular building you'll be working in.

 

Generally - driving and parking in Halifax isn't very fun. It's a small and old peninsular city, so the streets aren't exactly the most efficient for traffic flow nor is there ample space for parking anywhere near the downtown So - if you can, I'd take public transit or walk.

[Dal07]

As for condominiums, I'm not aware of any that are near Dal campus.

 

There are actually a lot of condo buildings close to campus, but they are usually quite expensive. Some of the older condo buildings have cheaper units for sale, but the condo fees are high (~$400 +/month). In some cases, this doesn't even include parking! For example, my best friend has a 2 bedroom and is a 5 minute walk away from campus - her condo was close to $350 000 to purchase, $350/month in condo fees, and another $150/month in parking!!

 

That being said, you can find some condos at 'reasonable prices', you just have to keep your eye out! My boyfriend and I have been watching the market here for the past year because if I get in this year we are planning on buying a small house ... so Elaine if you have any questions about buildings/areas, let me know

[doc2B]

I am a former Dal Student and I hope to be accepted there this year. I also currently work at the VG site of the QEII. I've never had my own car so parking was never a huge issue for me at Dal, but I know the on campus parking (lots) are brutal and over the past 4 or 5 years they have been moving away from 2 hr parking spots to parking meters.

 

When I worked at the IWK I rarely brought a car to work, and always parked on the street so I don't know much about their parking lot. I know people I used to work with got parking passes for a small private lot across the street.

 

I have parked in the QEII lot (VG site) a number of times and its a $10/day max (if you don't have to move your car throughout the day at all, otherwise you may pay more like $15 or $16). Although the lot does fill up throughout the day I've never NOT been able to find a spot even if I've left and came back in the afternoon. The HI site would have similar fees but most likely would be easier to find spots throughout the day. I have heard of a $5/day staff parking lot, but I've never verified its existence (it could be the staff lot for the Rehab centre across from the VG site).

 

There are other lots in the area (not related to the hospital) that I've heard of people buying/renting spots from. They may be cheaper than the hospital parking.

[doc2B]

As for the mortgage discussion. I bought a house with my fiance in Dec. 2005

Its not too far from campus I normally drive as its a 50-55 minute walk (which is sometimes nice). There isn't much around in good neighbourhoods for prices that we paid back then but still some reasonably priced houses and condos are available. Everything close to Dal is going to be relatively expensive (to purchase) because this is the southend which is considered to be a higher-end neighbourhood in Halifax.

 

I didn't have any issues getting a mortgage (I was in grad school at the time) because my fiance was working full-time so it was mostly based on his salary. I don't know anything about getting a mortgage while in med school but I certainly don't think that they would be high risk borrowers.

 

I'm quite happy paying money to my mortgage rather than rent, because I have friends that pay more per month in rent than I do for my mortgage.

 

As for the statement:

My personal opinion is to avoid accumulating huge amounts of debt. If you can avoid an LOC, avoid it! If you can avoid a mortgage, avoid it! The current real estate market is going to crumble soon anyway so I'd steer clear of home ownership at the present time.

 

Debt is never a good thing, if you can limit the amount you have borrowed on something like an LOC its a good thing. But avoiding a mortgage is unrealistic. Even when you're done medical school and working it is very difficult to save the amount of money required to purchase a house with cash. Having a mortgage isn't like having other forms of debt because owning your house gives you a significant asset. You can sell your house at any time to pay off the rest of your mortgage and be debt free (assuming you don't have any other debts). Whereas if you rent your whole life, just so you don't have the debt of a mortgage you'll always be wasting that money. You'll always have to be paying X amount of dollars to live in your (rental) home. If you own, after the mortgage is paid off you have a house that's worth a significant amount of money. And although there are still tax and utility costs you won't have another large monthly bill.

 

Just my 2 cents.

[Poolboy]

Thanks doc2B, some nice opinions. I have a mortgage now in my first year, and we are wanting to upgrade so we can fit our growing kid into some more room - We are searching for a bigger mortgage and I seem to get mixed signals from the bank (my wife doesn't work so no income coming in). One guy at RBC said probably not, another said yes, as long as we can put down 20% - and 10% of that can come from my LOC - this second guy was involved with the RBC LOC med program so he seemed to know what he was talking about.

[doc2B]

Sorry to resurrect a bit of an old thread. I just wanted to add some mortgage stuff. Like my previous post mentioned we got our mortgage with my Fiance's salary so I don't have any experience attempting to get a mortgage in med school. It seems to me that there are bankers that no more about lending programs available to med students/residents than other bankers (as Poolboy mentioned). If you go to a regular mortgage specialist they may give you information based on a regular borrower rather than a med student without investigating further because they may not have experience in this area. A mortgage broker (not associated with a bank) definitely wouldn't have experience lending to specialized groups like med students and is therefore less likely to lend you money based on potential earnings.

 

Anyone looking for a mortgage in med school is probably best served to find a banker that knows about med school lending programs and is involved with lending for LOC, this person can probably direct you to someone that knows more about this than the average banker.

 

One last comment about the QEII parking as well.... I did find out that the staff lot at the rehab centre is the $5/day lot (they don't normally check IDs but could) and it fills up relatively quickly in the morning apparently.

[kwasko@dal.ca]

I just wanted to renew debate on this post. I'm looking at buying a condo. I can come up with the downpayment and then make the payments out of my line of credit for the time I'm in school. Is the bank likely to approve this? I could probably get a co-signer.

 

What has been the experience of others?

[medordie]

Doesn't MD management offer mortgages? Any students try them?