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Should I rent or buy in a pricey market under very unique financial circumstances?
Question : Should I rent or buy in a pricey market under very unique financial circumstances?
Debating renting vs buying in Calgary:
I have just graduated as an MD and now have a contract to work for 5 years as a resident where I will have very limited funds, guaranteed to be followed by significantly more. I have approximately $ 85 000 in debts related to education, with a number of tax credits and potentially up to $ 15000 in debt relief to expect.
Now my question is, should I rent or buy when I will have a sizeable income after the first 5 years. My parents are willing to throw down a downpayment for me of about 10-15%. The places that I’m looking at are between $ 280-400k, with condo fees ranging from about $ 200-500/mo. I am completely happy lowballing and lowballing and lowballing until I get a good deal somewhere on a strictly investment property. I would hold this property for at least 5 years, after which I will very likely sell as I will have to move for a fellowship and then again for a job which (at least I hope) will be in Calgary.
For the next 5 years my salary will be as follows:
Year 1: ~$ 55 000
Year 2: ~$ 61 000
Year 3: ~$ 65 000
Year 4: ~$ 70 000
Year 5: ~$ 76 000
And each year stipends of approx $ 3000 on top of that as a very conservative measure (these are guaranteed).
Here’s where it gets interesting:
Year 6: ~$ 120 000
Year 7: ~$ 120 000
Year 8: ~$ 300 000 and then some, which will continue to increase each year.
I cannot begin to think of the math that would go into calculating such a mess including paying as little as possible for 5 years (35 year term) then paying significantly more in the years following that to pay it down quickly as I am able. Anyone who has any insight into this at all it would be very much appreciated! Other notes: young, without any additional significant financial responsibilities (ie wife, kids, car payments, etc.).
Some answers seem to be way off track. Let me clarify. I have just graduated as an MD, and have entered a surgical residency. I am not guessing at my income. These are very conservative measures, the first 5 years being guaranteed IN A CONTRACT THAT I AM ALREADY BOUND BY.
Contrary to some answers, I highly doubt that young physicians are what caused the financial crisis in the US. I have already been pre-approved for the mortgage size I am seeking.
financial debt relief
Best answer:
Answer by Dreama
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#2 written by Mr.Morgan 1 year ago
You cannot buy a house at any price with that salary and debt load. your year 1 salary alone would only net you a house in the 100,000 to150,000.00 dollar range without the debt part. You did not add in food, gas, electric bill which run about 400.00 in a 2000 square foot house during the winter and summer months, property taxes, PMI, car payment, water bill, health insurance, maintenance of the house; roof repairs, interior painting, furnishing your home and so much more. Your better plan would be to put as much as you can on reducing your debt that is the main thing that is going to hold you back. No bank will loan you money on your projected income only on what you are making now. If you wait five years the interest rate will be up around 8 or 9% at those rate the size of the home you want will still be out of reach, unless you can reduce you overall debt.n Good Luck.
EDIT:
400,000 minus 15% down = 340,000 loan + about 35,000 in closing cost= about a loan of 385,000.00 @ 6% for 30 years equals about a monthly mortgage payment of 2308.27 + 300.00 for condo fees = 2608.23 per month, you will bring home after taxes about 3,900.00 per month which leaves you 1,291.77 for food (about 800.00 a month for a single person), car payment, electric, gas, PMI, furnishing, school loans ect. What about funding your retirement account (which should be about 20% of your pay) and your emergency fund which is suppose to be at least one year salary? The answer is you still cannot afford this condo even with a co-signer; which is the only way you could have been approved. By the way if you default on your loan the co-signers will have to pay your loan off. So if you have your heart set on making the bank and school rich and join the other 75% of American’s drowning in debt then go ahead buy the condo you can’t possible afford. Why are you hear asking for financial advice you if you won’t listen? And if you think 300,000 is alot of money that’s because you are young. Anybody pushing you into this loan knows how to manipulate the numbers to make it look good to you, that is because they know, you don’t know enough math to defend yourself and they will walk away with a pocket full of money(The real estate agent alone will walk away with over 20,000.00 plus 15,000.00 in closing is about 35,000.00 in someone elses’ pocket), and even though they are not doctors and many only have a high school diploma, they will make more money then you ever will, and you will wind up just another statistic. I know this sounds harsh, but that is why so many home owners are losing their homes in the first place- wanting vs reality.
Good luck. -
#3 written by Nunya 1 year ago
i would discuss the specifics with a mortgage broker. in most circumstances a balloon payment is a bad idea. however due to your unique circumstances income wise, perhaps a mortgage with a balloon payment would work well. it would provide you with lower payments during the 5 years that you will have lower income. however i’m not sure what to tell you regarding that you would be selling within 5 years. the way the real estate market is, it is difficult to say. when it comes to real estate, 5 years is a relatively short amount of time.
although in most markets it is at least a great time to buy!
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I think you are making the same mistake that contributed in large part to this financial crisis. Assuming that you will have sizeable income after the first 5 years is a mistake. That is what most people did. They took out huge mortgages because they “assumed” their income would rise down the road. Maybe it will, but for many it didn’t. Are you sure that you will make $ 76,000 in year 5. If T-bills/bonds were generating that income, then you could be sure. Also, with $ 85k of debt you should not take on more debt to buy a home. Are you crazy????