The purchase of a property may seem impossible after graduation, especially if one takes into account the large number of students in debt. Indeed, it is quite complicated to pay the bills, repay the debt accumulated during the studies, save money for a first payment and get into debt even more by means of a mortgage. According to the latest news, the prognosis is not very encouraging for newly graduated students who want to buy a house. For many reasons, fresh graduates may prefer to rent an apartment, but in some cases it would not be cheaper than a mortgage. With a little planning and discipline, it is quite possible to save for the purchase of a first home.
Let’s analyze the numbers
To date, the average price of a house is $ 300,000. If we follow the trend, this price is supposed to wait for a staggering $ 550,000 in 2020. Take, for example, an average salary of $ 40,000 a year, with an annual increase of 3%. Five percent of the salary would go into the savings account with a return of 3% annually. The student loan is close to $ 28,000 with a 3% interest rate. If we follow this example, the average Canadian graduate can expect to save 5% of the first installment in 12 years and pay back his student loan in 14 years. If the person wishes to make a payment of 10%, it takes him 21 years to save the necessary amount. As the cost of education decreases, it will take one person six years to pay off student debts, ten years to set aside the 5% of the first installment and 18 years to accumulate 10%. Taking into consideration the average life of a mortgage, which is 25 years, the average graduate can expect to own a property in 35 to 46 years.
What to do to save?
If you look at the figures above, it can be very discouraging to get into a mortgage for fear of being in debt until retirement. So, how can you avoid it? The answer is simple: increase incomes, reduce expenses and make the biggest first payment possible.
The best way to save as much as you can is to budget and stick to it. Daily expenses can add up to a salty bill at the end of the month. For example, you could do your coffee at home rather than buy it in town. You must keep a detailed list of your expenses in order to clearly see where it is possible to cut. Having a second job, for example, will allow you to increase your income and at the same time reduce your free time, which is your free time to spend.
If you have student loans or consumer loans, you can still transfer them to a low interest rate line of credit. It is advantageous to consolidate all of your debts into one account, which will facilitate money management and repayment. Finally, it will save you time and money.
Finally, take a look at government, provincial and municipal funding programs such as the First-Time Home Buyers ‘Tax Credit (HICP) or the Home Buyers’ Plan (HBP) that exists to help you make your first payment.