12

Background Information:

  • I am 24 years old
  • Graduated from University 2 years ago
  • Currently working full time at a bank in downtown for the past 1 year
  • Living at home with my parents

My parents paid for my tuition - I never had any loan of any type, I just drive my parents' car. I have 3 credit cards and I've always paid them on-time regularly and never went over my limit, and I've got my balances increased a couple times because of that. Since I live at home, the only expenses that I have are basically my cellphone bill, transportation cost (parking and subway), food (on the weekend), and any other shopping/entertainment expenses, I also give my parents a few hundred a month.

After all the expenses, I save about half of my earnings and put them away into a TFSA. I currently earn $30,000 before taxes a year and I have saved $15,000 in my TFSA so far.

  • My boyfriend is 27 years old
  • Graduated from University 2 years ago
  • Currently working full time at a insurance company uptown for the past 2 years.
  • Living at home with his parents.

His parents paid for his tuition. The only 'loan' he has is his car which he is leasing for $450/month (for the lease and gas). He has a few credit cards and he always pays them on-time regularly and never went over the limit, with increased balances as well. Since he lives at home, his only expenses are his cellphone bill, transportation cost (gas, parking is free), food (on the weekend), and any other shopping/entertainment expenses. After all the expenses, he saves about half of his earnings and put them away into investment. He currently earns $35,000 before taxes a year and he has saved $50,000 so far (he worked before graduating from University thus more savings).

Scenario

My boyfriend and I have been together for 8 years now, and we are certain that we are going to get married (just a matter of when). We were casually talking about buying a house together, and I was surprised how serious he was about it. His parents are very supportive and so are mine. Together, our parents are giving us $250,000 for our downpayment. We have already started looking at houses recently. We are looking at freehold townhouses around $400,000 and also condo apartments at around $310,000. We prefer townhouses because there's no condo fees involved.

Upshot

Based on everything said, do you think that we are financially ready to move out?

Community
  • 1
Joanne
  • 121
  • 4
  • Welcome to the site. If you are or aren't ready is an opinion and tricky to answer, but we can certainly provide a comprehensive list of what to expect and plan for. This is a pretty complicated question to answer. You might have some other questions, and feel free to ask away. – MrChrister Dec 13 '12 at 22:08
  • You mention paying the cards on time. Are they paid in full, or do you both carry a balance month to month? – JTP - Apologise to Monica Dec 14 '12 at 04:20
  • 3
    Be very very careful about pooling in money on investment i.e house or something else. Money is a very bad bed partner, so be ready to safeguard your money when things ever turned sour(not that I am a mean person and hoping so). I am wondering when your and his parents are happy to tab the bill, why spend your money. Just contribute your share to your parents(which you already do), which maybe is very less and an awesome Christmas present to your parents. Save some more before you get a house. – DumbCoder Dec 14 '12 at 09:21
  • MrChrister - Thank you. Yeah I understand this is a pretty complicated question and there is no simple answer to it because it depends on a lot of factors. I just wanted to get some opinion on it :) – Joanne Dec 14 '12 at 13:43
  • JoeTaxpayer - They are paid in full, and we always save approx half of our income after paying our credit card. We don't carry any balances month to month and we don't incur any interest. :) – Joanne Dec 14 '12 at 13:44
  • DumbCoder - Thank you for your opinion. How much more do you think we should save up first? I am just afraid that the house prices will just keep rising, and since we have the downpayment now, we should buy it sooner than later? – Joanne Dec 14 '12 at 13:46
  • One question, if the house prices fall down again after you buy, what would be your reaction(will you curse yourself). Seems rhetorical but you need to ponder on it. If it goes up then all is well and good. Your expenses would surely increase when you move out. Between you and your man, you would need to decide how to payoff the mortgage and parents(if required). I would stay put for some time more. This is my opinion and I don't claim to be a soothsayer. – DumbCoder Dec 14 '12 at 16:48
  • 1
    I think buy vs rent is a whole different topic which is a little outside of the main question here. – Vitalik Dec 14 '12 at 16:49
  • 3
    The $250K, I read this to be a gift, not loan. Is this correct? – JTP - Apologise to Monica Dec 15 '12 at 01:31
  • May I suggest living while renting before buying a house? I had been with my girlfriend more than 2 year when we move together (far less than you but still) and we had many hard time in the first year. After a year or two you will also have a better idea of all expense you occur to live on yourself. – Rémi May 19 '15 at 17:07

3 Answers3

9

I'm not a lawyer, and I live in the US, not Canada, so I don't know anything about Canadian law.

However, from a commonsense perspective, I would be reluctant to purchase real estate with someone I wasn't married to, unless I had a written contract, properly executed by an experienced lawyer, which detailed the arrangement. Of course, I might have done differently when I was younger (and dumber), but that's my take at this stage of my life (middle age, nearly 20 years of marriage).

Your post made me curious, so I did a quick search and found a couple of things which were thought-provoking:

Unmarried Couples and Property Basics

Who gets the house when an unmarried couple splits up?

These two articles cover the question from an American legal perspective, but I suspect there are many similarities between American and Canadian law, so maybe they will give you some helpful perspective.

What is cohabitation?

The last article reads:

In Ontario, Canada, a cohabiting couple who have been together for several years or who have a child have formed a common law marriage. This arrangement gives them some of the same rights as married couples, but it is not considered the same as a legal marriage. Under provincial family law, a person leaving a common law marriage is entitled to financial support, but they do not have the right to a share in the property accumulated while the couple was together. To make a claim for property division, proof that the property was bought jointly must be produced.

I don't know which province you're in, but were I in your shoes, I'd want to look into this before I committed to buying property with someone.

And please, don't get me wrong... I'm not trying to suggest that you'll split up eventually. I'm just playing the devil's advocate, and suggesting that you consider this very carefully before you do something which may turn out to be foolish in hindsight.

Zippy The Pinhead
  • 473
  • 2
  • 5
7

You both earn $65,000, $5417/mo. A well written mortgage would allow 28% to cover the mortgage, property tax and insurance. From $1517, let's assume $1100, just to get an idea of what size mortgage you can afford. At 4%, on a 30 year amortization, $1100 supports $230K. You say you are getting $250K from the parents and only need a $150K mortgage. That's a $716 monthly payment, or $8600/yr.

Look at What are the primary expenses I should account for in my budget upon college graduation?

It was a great list of things to look at for those starting to budget. Obviously, a live-with-parents budget is far different from a couples' budget, but you both have shown that you are good savers, instead of blowing through your income, it's getting saved. DumbCoder's comment questions are excellent, and with respect to Vitalik, you should analyze the rent/buy decision, we'd be remiss to not point that out.

Take your income and create a full budget as if you were in that new $450K house. How does it look to you? Keep in mind, it's about twice the house you'd afford just on your income, without the gift. The maintenance, tax, and utilities will still reflect that higher cost even though the mortgage wont.

Community
  • 1
JTP - Apologise to Monica
  • 172,273
  • 34
  • 296
  • 560
6

Start using budgeting software like Mint.com, you can setup goals there, for example if you expect your rent or mortgage to be $1000/month, setup a goal of saving $1k/month, start paying your groceries bills now. you'll see if you are ready or not.

Sounds like you already do a great job saving up and you are very diligent counting the money.

Vitalik
  • 5,463
  • 1
  • 25
  • 35
  • Vitalik - Thank you for your opinion. I actually do use mint.com's iphone app, it shows my savings, and expenses. But I haven't used the budgeting function of it. That sounds like a good place to start. Thanks for the great idea :) – Joanne Dec 14 '12 at 13:52
  • mobile version lacks some of the features of the web version. I don't think mobile version has goals and trends yet. – Vitalik Dec 14 '12 at 14:36