Should You Get a Mortgage While In School?

Most people would tell you that you are crazy to get a mortgage while in school.  It does initially seem a little crazy, I’ll admit.  The idea of taking on rather large monthly payments when you can’t even work full-time (or maybe even part-time) hours seems counter intuitive.  On a more basic level, who wants to deal with the headaches of owning property and becoming educated on the personal finance basics that go with a mortgage while they are still in school?  University and/or college is about having a good time, maybe focusing on school for a little while each day, and enjoying the severe lack of responsibility that you have right?  That might be true, but for a certain amount of people, taking out a mortgage and buying a property while going to school can actually be a pretty good deal.

If you take the initiative to read up a little on how mortgages work, and what you will need to do in order to obtain one of these loans from a financial institution (you’ll probably have to rope your parents into helping you out) you can make the finances work in your favour pretty easily.  If you are a pretty low-key person who has friends with similar tastes, why not offer to let them live with you, or in your basement suite for slightly below market rates?  If the average rent on the Kijiji ads in your area is $400 a month plus utilities, tell them you’ll pay for the internet (which you would be paying for anyway), and you’ll rent to them for $375 a month.  Who wouldn’t want that savings?  Now obviously this is only a good option if your circle of friends doesn’t like to party until all hours of the evening, or destroy their living spaces (yes, I have some friends like this… in fact when I was 18 I might have had a few shades of these characteristics myself).

You can also rent to strangers.  While this will take a little more work, and you will be rolling the dice with an unknown housemate so to speak, I’ve seen it work out before.  The good news is that you can charge market rates and not feel guilty about it (no friendship discount applies).  If you are going this route I highly recommend checking out some articles on how to be a successful landlord because there are some MAJOR obstacles that can surprise people that are new to the game.  If you have a family friend, or a “friend of a friend” that knows a little about real estate and rental contract law (and that you can trust) it would definitely be worth your time to sit down and have a chat with them before agreeing to any tenant agreements.  Once those contracts are signed by both parties, mega pain can ensue if homework has not been done.  Renter’s rights are a known minefield that needs to be navigated carefully.

That being said, I don’t want to scare anyone off of a good idea.  If you get a home loan stretched out over 25 years, and are charging rent to 2-4 people, the numbers will usually work out that you can make your mortgage payments with the rent cheques you are getting from your tenants.  Not only are you getting to live somewhere rent-free, but you are building equity that should have numerous benefits for you later in life.  Multi-family units bring even more interesting possibilities into the game, but also increase the chances of headaches.  How far you want to get into the landlord/real estate game is really up to you, but just do your homework before you’re in too far!

 

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I think the risk here is that once you’re done with school, what will you do with the property? The type of place I lived in college and grad school is vastly different from where I’m raising my kids today; so you might not want to continue living there, specifically. And many students move out of the area after school – not sure I’d want to be an out of town landlord, either. And selling a house today is a PITA. Just some other not-necessarily-financial caveats to add, I suppose!

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