Will Compromise Help You Afford Rent or Mortgage Debt?Apr 30, 2019
As the millennial housing crisis continues, one word stands out for young Canadians trying to keep a roof over their head: compromise. Buying power for Torontonians in their 20s and 30s continues to decrease, and buying a home without needing some kind of help with the mortgage debt has become almost impossible for some.
According to a new report from Royal LePage, the recent mortgage stress testing rules have resulted in millennials losing “16.5 per cent of their purchasing power, or an average of $40,103 per person” since 2017. As a result, young adults who want to enter the housing market are getting creative — whether it’s coupling up, finding a roommate or getting help with the mortgage debt from their parents.
These aren’t the only compromises being considered, either. As millennials face financial challenges like tighter budgets, heavy student debt loads, high cost of living and a tough job market, they’re considering other options to help make buying or renting more affordable.
Would you be willing to move to a more affordable city?
It’s no surprise to anyone in Toronto that buying a home in the GTA is a big hurdle to overcome. Unfortunately, rising rent is also an issue. Toronto continues to have the most expensive one-bedroom rentals at an average of $2,260, an increase of 11.9 per cent since December 2017 according to Padmapper.
Relocating to a city with less expensive home prices and lower rent may be one answer. Consider the opportunity — someone living in Toronto earning $50,000 paying $2,260 per month for rent, is left with $980 a month for everything else — including utilities, Internet, phone, discretionary expenses, debt repayment and savings goals.
Compare that to a city like Winnipeg, where a one-bedroom is averaging $960. That leaves you with $1,384 a month for other expenses — not only leaving you more money for basic necessities, but also paying off debt, building emergency savings or saving for retirement.
It’s true, moving isn’t for everyone. But it is a compromise being made by millennials in order to live more affordably and balance their financial needs.
Would you delay other important financial goals?
Considering the scenario above for someone living in Toronto, it’s clear there isn’t a lot of money left at the end of the month for savings. Another compromise being made by millennials is delaying other financial goals in order to keep a roof over their head.
According to BDO’s Affordability Index from last fall, 34 per cent of millennials say their debt load is overwhelming and they don’t know what to do about it. Of these, 82 per cent are financially unprepared for retirement, 72 per cent for financial independence, and 56 per cent for children.
This ability to start a family stands out for many millennials who are balancing debt loads with their rent or mortgage. One-in-five millennials are actively delaying having children because they feel they can’t afford a family. This Global News article has a few solutions for millennials in this situation, but ultimately it’s a compromise that’s hard to avoid for those who need help affording rent or mortgage debt.
What compromises would you be willing to make in order to own a home? Join the conversation on social media using the hashtags #LeaveDebtBehind, #Budget, and #Millennials.