What lies ahead for today’s graduates

By: Matthew Presz

For many students, it has been a smooth transition from residence in first year to a home off-campus for the remaining years of university. Rents would typically be around $500 per month for a room in a house of approximately four to eight students, or $1,000 to $1,200 per month if students opted for more privacy in a condo apartment.

There are also many who chose the commuter life in anticipation of having to payback those dreaded student loans or simply wanting to live at home. Regardless of housing decision throughout the degree, most of McMaster’s graduates will leave with greater knowledge, more skill, a better network and a hefty sum of student debt.

What lies ahead for our dear graduates? Social media has been littered with articles about rising home prices in Hamilton, especially in light of the New West Harbour Go Station and impending revitalization of Barton Street. Canada’s banking regulators have also imposed a stress test, as of Jan. 1, 2018, which slashes affordability, and seems to have the greatest impact on first-time homebuyers.

However, when it comes to affordability, there are ways to get creative when deciding how and when to jump into the home ownership circle. Rather than running straight to the bank for a pre-approval, a mortgage broker could offer an alternative lending solution that is not subject to the new stress-testing imposed by the Office of the Superintendent of Financial Institutions.

Don’t rush into any decisions when dealing with funds of a large scale and definitely do not be discouraged. There is light at the end of the tunnel for all McMaster graduates who surround themselves with proper due diligence.

Or how about help from parents? This does not mean gifted money, as only a few families could afford this, but it could be in the form of access to a Line of Credit, which would still be the burden of the recent grad. However, it would make a down payment feasible, limit mortgage default insurance costs and essentially create an extension of the upcoming mortgage.

Financing aside, let us discuss some of the options when deciding where to live. You may have rented a room near McMaster for the past couple of years, but you won’t want to be buying there as a personal residence, unless you are offsetting the mortgage through rental income of the other bedrooms. The average price of a home within one kilometre of the university over the past six months has been $594,461. Let’s compare that with an average selling price of $305,191 in north Hamilton and $424,714 on the Hamilton Mountain. The stated prices have only comprised of freehold properties, no condo or maintenance fees included, so that a more fair comparison can be seen.

A common theme that I have seen for alumni who wish to work and live in Hamilton upon graduation has been to secure a steady job and rent for one to two years while paying off student debt and saving for a down payment. This is followed by the purchase of a home whereby prospective rent could subsidize the mortgage.

Take, for example, a bungalow on Hamilton Mountain that costs $425,000 and has a separate entrance into the basement equipped with a mini kitchen, bathroom and two bedrooms. While the mortgage, utilities, home insurance and property taxes would likely run approximately $2,500 per month, that homeowner would also be able to charge upwards of $1,200 per month rent for the basement, leaving them with monthly home expenses of $1,300 per month.

Compare that cost of a freehold bungalow with the purchase of a one bedroom condo apartment in Hamilton, which is selling for an average price of $300,000 along with monthly condo fees of $300; total monthly costs at approximately $1,750. Often times, smarter investments do not have to cost more, and will end up costing less than rent in many cases.

The key to making a sound real estate investment is knowing all of the options at play, which can be used in conjunction with proper planning and budgeting. There is no such thing as equilibrium when it comes to the real estate market. The prices are driven by sentiment, which in turn leads to favourable conditions for those who have prepared accordingly.

Don’t rush into any decisions when dealing with funds of a large scale and definitely do not be discouraged. There is light at the end of the tunnel for all McMaster graduates who surround themselves with proper due diligence.

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