Singles should be extra diligent when buying homes, say experts
Low mortgage rates are making homes easier to finance, and perhaps more attractive to young singles. An expert with TD Canada Trust says for those who have a stable job and don’t foresee a move, buying is a better investment than renting. — Photo by ThinkStock
Cobi Falconer single-handedly paid down the mortgage on her Vancouver condo while also paying tuition for four university degrees and working numerous jobs simultaneously.
Seventeen years after she bought the studio space in the trendy Kitsilano neighbourhood at the age of 23 — with some downpayment help from her father — Falconer is proudly mortgage-free.
“It was a very rewarding experience. It’s all part of growing and learning and maturing,” says the 39-year-old archivist, who took on two full-time serving jobs during the summer and added co-operative and teaching assistant gigs during her grad school years.
“As a young person investing early it just made so much sense to not have to put money towards rent. It’s like investing in yourself.”
Census data released by Statistics Canada this week show that, for the first time, there are more people living alone in Canada than there are couples with children. One-person households now make up 27.6 per cent of all homes, a three-fold increase since 1961.
Many Canadians are getting into the market on their own as low mortgage rates make ownership easier to finance, and young people stay in school longer and get married later in life — or not at all — while baby boomers settle down on their own after a split.
But experts say singles should be extra diligent about some choices that come with buying a home.
“There is something about being on your own — the individuality, and you don’t answer to anybody — but if something goes wrong, you don’t have a backup too,” says Mark Weisleder, a Toronto-based real estate lawyer.
When deciding whether it’s time to buy or keep renting, one of the most important factors is how “rooted” you are, says Farhaneh Haque, director of mortgage advice at TD Canada Trust.
If you have a stable job and know you’re going to be in the same city for the foreseeable future, buying is a better investment opportunity than renting, she says.
But you have to be able to commit for at least three to five years. It’s not wise to buy if you may sell in one or two years because the expenses associated with selling — including the five per cent commission paid to a realtor, plus legal fees, land transfer fees, etc. — can erode any investment gains made.
Also decide whether you’re willing to give up some of the perks, like travelling, dinners and nights out, of not being tied down to commit more of your income to a property.
For her part, Falconer decided against owning a car, rents out her parking space for extra income and eliminated frivolous purchases.
Being single makes it a little more difficult to save up a sizable down payment, so you may have to choose a condo or a property you can rent out to help pay some of your mortgage.
“When you’re buying by yourself, as opposed to buying as a couple, you sort of have to do double the work in terms of thinking about how you’re going to afford this,” says Haque.
Save up the biggest downpayment you can — you don’t have to pay mortgage insurance if you’ve got 20 per cent — to make monthly payments more affordable and to pay less interest. In addition, you have to have an adequate nest egg set aside to cover costs associated with the initial purchase.
Your priorities as a single likely differ from those of a couple, so make sure you choose a property that aligns with your lifestyle as well as what you can afford.
Falconer’s small studio space by the beach works because she can walk everywhere she needs to go.
For a single person, going with a condo may better fit your lifestyle because its requires a lot less maintenance. It could be harder to do things like just leave on a trip on a whim due to security concerns or financial burdens associated with upkeep of a non-condo property, Weisleder says.
Meanwhile condos usually include amenities, security and some upkeep on the building.
If you’re unsure about whether buying is right for you, create a budget that includes your rent as well as living expenses and see how much you have left over to determine if you could comfortably carry a mortgage.
Owning costs about $500 to $600 more per month on average than renting, so you need to have that cushion, in addition to saving for a down payment, Weisleder says, adding that housing costs should ideally not eat up more than 30 per cent of your monthly income.
And remember that lenders can be harder on a single person because they are deciding based on only one credit report and one income — so you may qualify for less house or have to get a co-signer.
Weisleder says singles should be very careful before agreeing to waive financing conditions because he’s seen lenders make a deal that the homebuyer thinks is ready to go, then receive a call later saying a co-signer is required.
This happens more often to single people than couples because lenders are more nervous about factors such as net worth and income.
Even if it’s not your dream home, ownership is an exercise in self-discipline that can provide a sense of individuality and accomplishment.
Buying as a single person doesn’t mean you’ll never live with a partner — it just helps you to build equity on your own and start saving for the future, says Haque.
“You’re getting a start. You’re sort of conditioning yourself to live within your means. You’re conditioning yourself to start saving and the interest rate is currently in your favour, so you can get ahead by building equity.”