Crunching affordability numbers only part of the equation for the single woman
Sun
The number of single women buying homes is on the rise across Canada. Royal LePage predicts 55 per cent of first-time homebuyers will be single women by 2008, compared to 45 per cent of men. Single women have had a huge impact on the real estate market, with both builders and home renovation chains catering more to these independent female buyers. The Vancouver Sun’s Brenda Bouw has written a book targeting this group, titled: “Home Girl: The Single Woman’s Guide To Buying Real Estate in Canada.” Below is an excerpt:
Angela Nolan was 29 years old when she announced to friends and colleagues she was buying a house — by herself.
“People looked at me like I had three heads. It was kind of like the look my guidance counsellor gave me in high school when I said I wanted to be an air-traffic controller. He said ‘You mean an airline stewardess?’ ” recalls Angela, now in her 40s — and a real estate agent in Hamilton, Ont., not an air-traffic controller. “People didn’t take me seriously about the house at the time. My co-workers didn’t think it was viable.”
She did it anyway. Angela says her decision to buy solo was a smart investment, both personally and financially.
“Having a house makes you a more attractive single girl. The alternative is that you sit back and say, ‘Oh, I’m just waiting for someone to help me and save me and take care of me.’ I’m not the damsel-in-distress type.”
Christiane, a manager for a Toronto-based book publisher, bought a house at age 33, after 13 years of paying rent in downtown Toronto and realizing the white picket fence and 1950s “June Cleaver waiting-for-a-man lifestyle” was a thing of the past. “Too many women think that’s what you have to do — find a boy, get engaged, blah, blah, blah. Ditch that idea. If you have a decent job, go for it,” Christiane advises. “For me, there was always a good reason to put it off. But looking back at all the money I threw away in rent, I regret waiting so long to buy on my own. You’re never too young to do it.”
Are you ready?
How do you know when the time is right for you? The Canada Mortgage and Housing Corporation (CMHC) suggests that potential buyers ask themselves the following three questions:
– Do you enjoy moving often?
– Do you prefer using your savings for such things as vacations, retirement, or starting your own business?
– Do you enjoy not having to worry about regular maintenance and repairs?
If you answered yes to any of these questions, then maybe, just maybe, you aren’t ready to buy a home. Remember that buying property means investing not just your hard-earned money, but a lot of time and energy. It also means making a commitment.
Take Brenda, a forty-something venture capitalist in Vancouver, who rents a beautiful apartment just blocks from the beach, on the main floor of a heritage home in the city’s moneyed Point Grey neighbourhood. While she makes good money in her career, she cannot afford to buy a property in that area without seriously compromising the lifestyle she now enjoys.
“The number-one reason I haven’t bought is the change of lifestyle it would require,” Brenda says. “I have witnessed so many single friends who, as soon as that purchase has been made, have no more spontaneous weekends. They are focussed on the house and that focus lasts a really long time. I think selfishly of how that has impacted my life. I have run out of people to have spontaneous trips with. They are not going out. The disposable income has dried up. It’s a dramatic change for everyone.”
Meanwhile, friends and colleagues have put pressure on her to join the homeowner club. “There are very few peers in my business who are still renting. Sometimes I feel like a social outcast.”
Brenda sought the advice of a financial planner. “Am I crazy not to be buying?” she asked. “What should I be doing with my money?”
Her planner brought calm. “He said, ‘You work too hard to feel like you cannot have the flexibility of trying to have a balanced life,’ ” Brenda recalls from the conversation. The financial planner advised her to ignore the peer pressure over buying property, and do what was best for her. What would make her happier? Spending time and money on owning and maintaining a home, or on leisure activities such as travel?
“I think my life would be more stressful if I was tapped out with a mortgage,” says Brenda. “It’s not like I’m rolling in dough, but I have a reasonable income that allows me to accrue cash to do things like go to Africa. There is not a hope that I would have been able to do that as a homeowner.”
Someday, Brenda says, she will buy a home, and she is setting aside money to make that purchase when she is ready.
To compare the costs of renting versus buying, there are a number of calculators you can access through a quick Google search online. These are useful, but they don’t take into consideration the lifestyle choices that are really behind the decision to buy a home (or not to buy).
Can You Afford It?
So how do you know if you can afford to buy? The common affordability rule used by financial experts is that your monthly housing costs should not be more than 32 per cent of your gross household monthly income.
CMHC defines monthly housing costs as your mortgage payment, as well as taxes and heating costs. If you own a condo, this sum also includes half your monthly condo fees. Add up these costs, and compare them to your gross income, and you’ll have a calculation known as your “gross debt service ratio.”
Here’s an example. If your gross monthly income is $5,000 (you earn $60,000 a year), you should pay no more than $1,600 in monthly housing expenses ($5,000 x 32%).
The next thing to consider is your total monthly debt load. This includes car loans, credit card payments, cellphone bills, gym memberships, and other monthly financial commitments. When you add these costs to that first calculation of housing costs, and compare them to your income, you’ll have what’s known as your “total debt service ratio.” The general rule is that your total debt load should not be more than 40 per cent of your monthly income. If it is, you may want to think twice about home ownership. Or, get those costs down to 40 per cent or less before you buy.
Patricia Lovett-Reid, a certified financial planner and wealth management spokesperson, as well as a senior vice-president with TD Waterhouse Canada, says you have to be honest with yourself about how much money you are really spending. It’s not like a diet where you can cheat when nobody is looking. “Clearly understand the money you have coming in from all sources and clearly know what you are spending your money on,” Patricia says.
This rule is especially true for single women buyers, because they will be solely responsible for the finances it takes to buy and maintain a home. She advises women to know their financial situation before they start looking for a home, and especially before they visit a bank or mortgage broker to negotiate rates.
“Treat yourself as though you are the chief financial officer. Ask yourself, ‘What are the risks? What will this mean for my overall lifestyle?’ There is no fun in being asset-rich and cash-poor,” says Patricia.
“People underestimate the stress and anxiety that owning a home can place on you.”
© The Vancouver Sun 2007