Buying a house while in med school?

[cassidybear]

Hey guys,

I'm considering buying a house while in med school and was just wondering what kinds of implications it has on OSAP and LoCs?

 

If anyone has any insight, I would much appreciate it!

[aaronjw]

Did you do any searching before asking this question? It has come up before...

[cassidybear]

I guess I was just hoping for someone with recent, first hand experience with this. (If I missed it on the forums, sorry)

 

Although any helpful opinions or even speculations on the subject would be much welcomed

[osteon]

To buy a house, you need to prove income, which most med students cannot do since there probably isn't any. If you have a significant other or cosigner that does have income, maybe you'd get approval but it's based on your money in/money out ratio so it's likely situation dependent. Additionally, if you go to a different city for residency, which is not totally under your control, you'll have to sell. Selling after only 3-4 years is not going to give much return on investment and you may actually lose on it with all the extra costs for buying and selling. For these reasons above, most will wait until residency to buy. Depending on your situation, buying can be advantageous though. I recommend you run the numbers under numerous best and worst case financial scenarios for both renting and buying over 4 years and over 10 years and see where that puts you financially at the end of it all. Factor in everything. Then consider your career plans and any costs or needs associated and how your 4 year and 10 year finances will fit in with that. See if your debt amount becomes astronomical or if its comparable to or better than renting.

 

I do not believe having a mortgage has an influence on getting an LOC from what the banks have told me. The opposite may or may not be true. Not sure for osap too. Best bet is to call the banks and osap about this.

[Orcamute]

I don't seem to get my head around why you would want to buy a house (assuming you don't have children) before you finish medical school.

 

You already have enough stress to pass your tests in school, do you really want to worry about making payments on a house? And even so--money to pay off your loc. Why not just wait until residency and then buy something really nice after?

[cassidybear]

Thanks osteon Thats great advice

 

Thats a good point Orcamute, I still have a lot of thinking to do... my parents and I are just toying with the idea because my younger sibling may eventually attend the same school for undegrad (obviously very tentative) allowing more use for the house

[WtsupDoc?]

Having a house with potential rental income could be beneficial, especially if your parents are looking at helping you out. If you rent out a couple rooms (or if your sister does the same later on) then you would be ahead compared to renting.

 

I know out current mortgage payment is less than if we were renting an apartment and we're actually building some equity... so it really isn't that much more money, if you get a modest house. It is however, a lot more responsibility.

[NutritionRunner]

I don't seem to get my head around why you would want to buy a house (assuming you don't have children) before you finish medical school.

 

You already have enough stress to pass your tests in school, do you really want to worry about making payments on a house? And even so--money to pay off your loc. Why not just wait until residency and then buy something really nice after?

 

In some areas, rents are absolutely ridiculous, and mortgage payments on a small, but still very nice home, can often be lower than rent!

 

That's the main reason why people buy a home even if they only plan on being in the area for 3-4 years. If a mortgage is substantially less than rent, then it can be worth it, for some individuals, to buy a home.

[tberry3]

EDIT: Info was incorrect, you can ignore this

[WtsupDoc?]

I don't think anyone has answered the OSAP question yet. My understanding is that your house would count as an asset, and would preclude you from getting any OSAP funding.

 

***Post edited for clarity

 

Only property that is not your primary residence counts as an asset and will affect the funding you are allocated.

 

(https://osap.gov.on.ca/AidEstimatorWeb/enterapp/enter.xhtml)

 

FROM THE OSAP WEBSITE:

 

If you or your spouse own any other assets such as investments, savings, property, etc., what is the total value of these assets?

 

Other Assets

Note: This definition is specific to the OSAP Application for Full-Time Students

 

Identify the total value of all other financial assets, including:

 

- bonds, term deposits, GICs;

- mutual funds;

- real estate (excluding your primary residence); boats or aircrafts; and

- all other investments.

 

Do not report savings that are from the following sources:

 

- savings from employment in the 16 weeks before you started your studies;

- money your parents transferred to you as their financial contribution to your studies;

- Registered Education Savings Plans (RESPs); and/or

- Registered Retirement Savings Plans (RRSPs).

- We collect information about these resources elsewhere in the application.

 

Also do not include:

 

- the value of your principal residence;

- clothing, furniture or personal belongings;

- non-economic loss and/or pain and suffering awards of less than $100,000;

- savings through the Ontario Child Benefit Equivalent program; and/or

OSAP funding (i.e., student loans, Queen Elizabeth II Aiming for the Top Scholarships, Canada Student Grants, 30% Off Ontario Tuition grants, Ontario Access Grants, Ontario Student Opportunity Grants, Distance Grants).

[schmitty]

As above ^

 

Owning a home will NOT affect your OSAP in anyway if you live in it...you do not even need to report an owned property to them if you live in it.

 

However, if you earn income (and actually report it to the CRA) from renting it out, then that income will affect your OSAP.

[cheech10]

The house would be the OP's primary residence, which does not count as an asset for OSAP (and the mortgage would be an offsetting liability anyway).

 

There are a lot of arguments against buying real estate in med school, though: unlikely to get mortgage approval without a cosigner, really limiting your financial cushion, and tying you down geographically being the three biggest. What will you do if you match elsewhere in CaRMS? Selling the property will incur 5% realtor fees, plus legal fees, so the house would need to appreciate significantly in a short time frame to break even. Also, owning a home is not cheaper than renting. Add in all the incidental costs (interest, legal fees, maintenance, utilities, property tax, insurance) and you'll quickly see it outstrip the equivalent rental costs. I would strongly suggest not buying real estate during med school (leaving aside the prevailing opinion that it is overvalued in much of Canada anyway).

[WtsupDoc?]

THE ABOVE IS WRONG.

 

Owning a home will NOT affect your OSAP in anyway...you do not even need to report an owned property to them if you live in it.

 

However, if you earn income (and actually report it to the CRA) from renting it out, then that income will affect your OSAP.

 

I said that property other than the applicants primary residence affects OSAP... that info is take straight from the OSAP website.

[schmitty]

The house would be the OP's primary residence, which does not count as an asset for OSAP (and the mortgage would be an offsetting liability anyway).

 

There are a lot of arguments against buying real estate in med school, though: unlikely to get mortgage approval without a cosigner, really limiting your financial cushion, and tying you down geographically being the three biggest. What will you do if you match elsewhere in CaRMS? Selling the property will incur 5% realtor fees, plus legal fees, so the house would need to appreciate significantly in a short time frame to break even. Also, owning a home is not cheaper than renting. Add in all the incidental costs (interest, legal fees, maintenance, utilities, property tax, insurance) and you'll quickly see it outstrip the equivalent rental costs. I would strongly suggest not buying real estate during med school (leaving aside the prevailing opinion that it is overvalued in much of Canada anyway).

 

Whether I agree with you or not varies widely depending on the location and specific circumstances. In some places, buying IS cheaper than renting. Even in my case in downtown Toronto where purchases prices are much higher relative to rent, usually, we only spend about $250 more each month compared to our old place in a not as nice area we were renting before. Also, we are gaining more than $250 in equity each month, so really we are not spending any extra money for a much nicer place that is ours. Any appreciation of the property (which has been significant so far - much more in the last 4 years than the approx 7% closing costs to sell) are just bonus equity for later. As for residency, we will either sell at that point or, more likely, rent it out easily for enough to cover all of our expenses on it.

 

As I said, one has to research their particular situation and location a LOT to see if it is worth it. In general, you are correct that one is not likely to save much money (if any, or even lose) if they sell under 4-5 years from when they bought it.

[schmitty]

I said that property other than the applicants primary residence affects OSAP... that info is take straight from the OSAP website.

 

Ah, your first sentence made it seem like you think it still counts but then posting the rules....

[WtsupDoc?]

Ah, your first sentence made it seem like you think it still counts but then posting the rules....

 

I'll edit the post so it isn't as misleading for future readers.

[rmorelan]

Having a primary residence is one way I avoided the asset rules for OSAP effectively.

 

Again OSAP is a bit weird. Still first law of economics - people respond to incentives - applies. If primary residencies are protected then you are going to have more people with primary residencies.

[cheech10]

Schmitty, are you sure you're including ALL the expenses, such as deferred maintenance (new roof, furnace, etc), interest on your down payment and closing costs (a significant opportunity cost), etc? You're monthly outlay may be less now, but the expenses are quite likely higher. I live in Toronto, just sold my downtown condo for a suburban house so I'm quite familiar with TO real estate, and while I'm not discounting the possibility that in a few cases owning is cheaper than renting, it's very rare in Toronto these days.

[rmorelan]

Schmitty, are you sure you're including ALL the expenses, such as deferred maintenance (new roof, furnace, etc), interest on your down payment and closing costs (a significant opportunity cost), etc? You're monthly outlay may be less now, but the expenses are quite likely higher. I live in Toronto, just sold my downtown condo for a suburban house so I'm quite familiar with TO real estate, and while I'm not discounting the possibility that in a few cases owning is cheaper than renting, it's very rare in Toronto these days.

 

ha - people always seem to ignore those in their calculations until the roof leaks.

[NutritionRunner]

Schmitty, are you sure you're including ALL the expenses, such as deferred maintenance (new roof, furnace, etc), interest on your down payment and closing costs (a significant opportunity cost), etc? You're monthly outlay may be less now, but the expenses are quite likely higher. I live in Toronto, just sold my downtown condo for a suburban house so I'm quite familiar with TO real estate, and while I'm not discounting the possibility that in a few cases owning is cheaper than renting, it's very rare in Toronto these days.

 

I'm not in Toronto (I'm in Guelph) but my husband and I purchased a house, because even after factoring in ALL the costs (including regular maintenance and upkeep, lawyer's fees, etc.) it was much, much cheaper to pay a mortgage than to rent a place. Our (new) townhouse is also much nicer than the places that were available to rent (at a significantly higher cost) and has all the amenities we wanted (dishwasher, washer/dryer, a/c, etc.). Well worth it for us.

[schmitty]

Schmitty, are you sure you're including ALL the expenses, such as deferred maintenance (new roof, furnace, etc), interest on your down payment and closing costs (a significant opportunity cost), etc? You're monthly outlay may be less now, but the expenses are quite likely higher. I live in Toronto, just sold my downtown condo for a suburban house so I'm quite familiar with TO real estate, and while I'm not discounting the possibility that in a few cases owning is cheaper than renting, it's very rare in Toronto these days.

 

Well I did mention closing costs...but yes, there are a lot of maintenance things to worry about as well. Though with a condo these are not nearly as bad as with a home - just condo fees which I include, obviously, as well as property taxes. The occasional appliance replacement (our laundry pair just died, so that's $2000) and little fix-it things here and there.

 

As I said, it depends a lot on the situation. Even if our condo had not increased in value, we would come out around even for 5 years, but ours appreciated quite a bit (about 20-25%) in the last 4 years so we are well ahead though we have no plans on selling.

[cheech10]

You still left out the opportunity cost of using a down payment toward a home rather than investing it. Eg. $50,000 (down payment plus closing costs) at 3% is $1500 per year (plus compounding), which has to be accounted for in the rent vs buy debate.

[schmitty]

You still left out the opportunity cost of using a down payment toward a home rather than investing it. Eg. $50,000 (down payment plus closing costs) at 3% is $1500 per year (plus compounding), which has to be accounted for in the rent vs buy debate.

 

Yes, that is true. But if you want to get picky, you are leaving out the gains from appreciation, which have been great in Canada over the past decade. We have already made over 20% on our condo, for e.g. in 4 years.

 

Also, our downpayment was only around $25K so investment opportunity cost was not a factor.

[Lonney]

Renting is ussualy better than buying if you are keeping the house for 5-8 years.

 

You are losing money vs renting if you sell before 5-8 years

You are making money vs renting if you sell after 5-8 years

 

It depends on a lot of factor, but the calculation can be easily made

[schmitty]

Renting is ussualy better than buying if you are keeping the house for 5-8 years.

 

You are losing money vs renting if you sell before 5-8 years

You are making money vs renting if you sell after 5-8 years

 

It depends on a lot of factor, but the calculation can be easily made

 

You can't make general statements like that...it depends completely on the specific situation...in my situation, which isn't too out of the ordinary, if I sold now after 4 years of ownership I would come out ahead by around $40,000 compared to renting a similar place. I agree often it is not better to buy if you stay less than 5 years, but in many other cases it can work just fine.