I thought I would share with you a product that could greatly reduce the cost of sending a child to university. While we cannot control the tuition, books, materials etc we can off set the cost of housing and even have a nice profit at graduation and a start on life for your child.
One of the biggest challenges facing young people coming out of university is the cost to repay student loans. It’s amazing when you think a person is graduating and they have a debt of 20k, 30k, 40k and even higher and now they have the added stress of finding a job to pay this debt. Also they now have to figure out how to pay rent, heat, food and everyday expenses. What if there was a way to off set these costs and give them a jump-start on life.
The product is a second home. You are allowed to purchase a second home with as little as 5% down. This second home is reserved for vacation homes, maybe a place for your aging parents and YES students attending university. This second home must be occupied by an immediate family member to qualify.
Lets look at an example. If you purchase a home for 150k with 5% down at today’s best rate of 3.59% your mortgage payment would be $738. Now let’s assume a yearly property tax of $3000 then the monthly cost is $988. You would look to purchase a home with at least 3 bedrooms and possibly a 4th bedroom in the basement. Today most students go to the same university as their friends. You would have your child invite his or her friends to move in with them to cover the costs. Your child could charge them $400 to $500 per month and they could split the food costs etc. This in essence helps your child gain the knowledge of what its like to own a home and the responsibility it entails. You are now getting between $800 and $1500 per month to cover the mortgage and taxes on the property. I checked the cost of a single room at a local university and the cost was around $5800/year with an additional meal plan of around 4k per year. Once they graduate you can put the property up for sale. Now if we use a 2% per year increase in property value then you should be able to sell in the 170k range. If all payments are made as agreed the balance on the mortgage after 5 years would be around 127k and therefore you should have about 43k left over. This means they should be able to get out of university with little to no debt owed and a huge advantage as they start their life. If you paid for the single room for 4 years the cost would be about 23k and you would have nothing to show for it and the student loan debt would be owed.
Talk to a professional about this. The consultation is free and it could save you a lot of money in the long run and give your child that added advantage and real life experience of owning a home.
As always your comments are welcomed and encouraged.
Eric Gall is a mortgage specialist for TMG Atlantic. If you are purchasing, refinancing or renewing your mortgage contact Eric at [email protected] or check his website at http://www.avantimortgages.ca/