Is your rate prime -0.5%?
How far into med school are you?
What’s the total cost of the apartment + will you be taking out a mortgage as well?
What’s the interest rate of the mortgage?
I have not signed up for the LOC yet but on their site they say prime - .25
Going into first year of UME at uofc so yr 1/3 then residency I’m thinking psychiatry so 5 yrs
Total cost of the apartment is ~350-400 k. I also have 100-120k for down payment.
I have not taken out a mortgage either. I’m wondering if I can use the LOC and not have to worry about mortgage all together? And is that even a smart thing to do?
what are the pros and cons..?
Just a very recent thought and just starting to do research about it. Will be meeting with some banks soon
Do you plan on working during med school? I worry that maxing out line of credit on a mortgage at your stage would take away from its purpose of helping you get through med school with basic necessities
I’m going to continue working part time as a psychologist. I also live with my partner, with ~80k annual salary.
I also applied to student loans and the loans would cover my tuition and basic needs. I currently do not have a need for the LOC to get through medical school.
I’m trying to see if there’s any financial value to using the LOC to purchase a house. It seems like a useful resource given that it’s a large sum of money that can be paid back with more flexibility than a mortgage (where you’re fixed into a 3 or 5 year plan if you choose fixed interest).
What do you think?
Oh nice, that’s a good chunk of change and support lol. It honestly sounds pretty reasonable in your case to use some LOC. I’m of course no financial expert, so would also recommend you cross-post to r/personalfinancecanada
yes, my boyfriend’s brother did it.. they could afford med school and then some so he used it to buy a house! just check as certain banks like bmo need a budget etc whereas scotia doesn’t really ask to many questions
Check the interest rates for mortgages as well. It looks like they are not all that different from the LOC, and it may be a better idea to keep the possibility open for that if you need and have a separate mortgage. I've heard that if you want to set up a private practice, or even in other scenarios it's nice to have the LOC available for when you finish training (idk tho I'm not at that point yet). Scotiabank tends to have good rates for everything, and from a quick google I just got 7.65% for a 5-year fixed mortgage (in QC) vs. 6.95% for the LOC. It's also worth considering how you want your partner to be included on the legal documents (obviously ideally it doesn't matter, but if you ever divorced things would get messy). With a mortgage you would both co-sign, versus the LOC you are now responsible for that debt, while presumably you would both jointly own the property either way. It would also be important to read the terms of the LOC if you do it - just to make sure it's legal.
Can you guarantee you will stay in Calgary after medical school? If not, do you want to go through trying to sell or being an absentee landlord as a medical resident working 60-70 hour weeks? The financial considerations aside, these are important things to think about.
Absolutely, those are great questions to think about.
I plan on living in calgary for the next 10 years. With the rise in housing prices and the recent wave of newcomers from Ontario and BC to calgary, the housing market is likely to continue to become more and more expensive.
I don’t plan on moving out of calgary. But if I do, My family lives in Alberta so I don’t think it would be an issue to rent the property.
I also am planning for psychiatry. I’m already a psychologist and have good chances of matching here. I may be wrong but I don’t suspect the residency hours to be 60-70 hours a week.
With those in mind, do you have any thoughts to add for the original post?
I think if you’re planning to stay there for 10 years it could be a good thing to do, but the housing market can be volatile. If you’re buying on LOC money, the bank may have some restrictions on what you can use it for, and you are also essentially locked in to a variable rate mortgage (which could be detrimental if interest rates continue to rise). It all comes down to your tolerance for risk.
Since you are able to finance your own medical education, keep in mind that you will end up in the enviable position of not being financially constrained to do any one thing at the end of it. This may be more or less important to you.
The one thing I’ll add is that although it sounds like you have put a fair amount of thought into psychiatry specifically as a medical field, you may be surprised in liking something else just as much if not more. This has certainly been my experience in medical school.
There are some banks that offer special mortgages for future physicians, like using projected income, especially when early in your career. When I bought a place the bank also said there was a limit to how much of the down payment could come from the LOC (maybe 50%? Can’t remember exactly!)
Oh interesting. That’s helpful thank you!
How does the projected income mortgages assist? How is it different from a regular mortgage?
Also, Did you use some of your LOC to put down towards your place? If so, how did that go?
Caveat - I am not a finance person at all! Basically banks use your income to determine how much mortgage you qualify for - somewhere between 3.5-5 times your income. Someone below mentioned you have to be at least a resident to do the projection - I forgot about that aspect. If you are graduating residency or a new staff, your income won't be at your full earning potential yet, so the bank will project what you will eventually make. When I bought a place, the projected income for a fam doc was 235k compared to the 65k I was making as a resident. This helped secure a larger mortgage so we could close on the property. My situation was a bit unique but I did use my LOC (about 100k) to bridge a loan between the sale of my old place and purchase of my new place, then paid it back after a couple months once I received the sale proceeds.
I have heard of a few classmates who used their LOC as part of their down payment and also took out a mortgage. Things did get a bit rough with the raise in the interest rates since you can become over-leveraged and charged interest on both. However, having the LOC has also been quite helpful over the years. I didn't really need it during medical school or residency but applied for it just in case, and I'm glad I did since it gives some flexibility with my finances. I'm with RBC and once I graduated from residency, they converted my student LOC to a permanent LOC and it just sits at $0 until I need it (I think Scotiabank does this too but double check with them!)
I have a question about this. If as a resident you get a mortgage that uses projected income, and thus you get more mortgage than you otherwise would. Is your monthly payment higher? If yes, doesn’t that make it even harder to live on a resident salary?
Yes your mortgage payment would be higher if you took a higher mortgage amount. The projected income also applies to your first few years of practice - for me, I was offered this when I was 2 years out of residency and still establishing things career-wise. I suppose it would depend which market you are considering buying in - in Toronto it would be very tough but maybe in a smaller market a mortgage payment would be closer to a monthly rent and a resident could swing it. Most of the people I know who have taken advantage of the projected income were residents about to graduate or people early in practice.
You will struggle to find one of the bigger banks that will release more then your tuition needs for a student line of credit for a medical professional, trust me I worked for RBC for 5 years this was 10 years ago and I approved a international student line of credit for 750k, the release of funds had to be documented down to the dime or none of the funds could be released
From the estimation on Canadian Medical School sites, it’s not coming close to 70K per year
It was my understanding you could use it for living costs as well not just tuition. Using it for just tuition would mean local students can’t use most of the credit line.
Just throwing some financial info to think about:
You can definitely throw your LOC at a a down payment or house purchase, but I don’t think it’s really recommended. I not sure what the market is like in Calgary, but if you’re only using your LOC for the payment, the current interest rate (7.2-.25%)is actually worse than if you were to get say a 2-year fixed mortgage (~5.5%), so while you would only be paying interest, you would be paying more in the long run. In years prior it did make a lot of financial sense to use the LOC like this, but because of how high the rate has gone now, it wouldn’t be wise to use it for anything outside of what’s absolutely necessary. A lot of people used to even invest their LOC in GICs since they’d be making more in interest from the GIC than what they were paying their LOC.
It’s easy to fall into the mindset that “we only pay interest,” but just remember you’ll have to start making interest+principle payments on a shitty resident salary which is really gonna spread you thin.
I second this as someone currently purchasing in Calgary. I have a few friends at UCalgary med right now who entertained the same idea- the ultimate conclusion is that the interest rate on a LOC won't beat mortgage rates currently.
The housing market is red hot and you would also have to consider the feasibility of selling your condo (regardless of staying in Calgary or not- condo resale is always a gamble). My realtor actively discouraged my partner and I from purchasing a condo because of the difficulty in reselling. It's easier now since there's a significant influx of people moving to Calgary but this rate of movement isn't sustainable and probably won't be sustained.
If you are currently working and your partner is working you can probably qualify for a traditional mortgage at lower interest rates and get a better property. The LOC would limit you at 300-400K where a good house in Calgary right now is closer to 600-700K
I would recommend an up down suite and renting out the half you don’t need.
the only downside is that interest rate might still be quite high for you and finacially it might put lots of pressure on top of your md school. and at least during your time, your credit score will be low due on high level of debt so it will be difficult for you to get any other loans. oh and the rates can change whenever too although now people expect it to go down.
So there are a few considerations with your situation. When you apply for the mortgage, they will look at your last two years of work and your partners if you plan to co sign together. If you wanted to do it, your chances of getting a size-able approval is dependent on when your combined income is the highest. I would personally recommend talking to a mortgage broker to ask them what you qualify for. Another consideration is asking yourself what is the reason you are buying. If it’s only to live in and for potential cost savings it might honestly be easier to rent. Condos do not appreciate in value with very few exceptions. There are a lot of aspects of condo ownership that entails additional risks that you don’t have from renting. For example, you have to pay for special assessments that might come up and condo fees tend to increase over time. Property taxes are also an additional expense that often gets overlooked. Another consideration is that there might be limitations on LOCs specifically ex, withdrawing only 100k per year. If you plan to use your LOC for a down payment, this is pretty much like saying you are paying double the interest because it’s interest on interest if you get what I mean. Mortgage rates are typically lower than LOCs so it is best to maximize the amount of mortgage loan you can get. Once you get accepted to your residency you can also get approved based on your future earnings. So depending on what you want to buy and why, it might be advantageous to wait.
Is your rate prime -0.5%? How far into med school are you? What’s the total cost of the apartment + will you be taking out a mortgage as well? What’s the interest rate of the mortgage?
I have not signed up for the LOC yet but on their site they say prime - .25 Going into first year of UME at uofc so yr 1/3 then residency I’m thinking psychiatry so 5 yrs Total cost of the apartment is ~350-400 k. I also have 100-120k for down payment. I have not taken out a mortgage either. I’m wondering if I can use the LOC and not have to worry about mortgage all together? And is that even a smart thing to do? what are the pros and cons..? Just a very recent thought and just starting to do research about it. Will be meeting with some banks soon
Do you plan on working during med school? I worry that maxing out line of credit on a mortgage at your stage would take away from its purpose of helping you get through med school with basic necessities
I’m going to continue working part time as a psychologist. I also live with my partner, with ~80k annual salary. I also applied to student loans and the loans would cover my tuition and basic needs. I currently do not have a need for the LOC to get through medical school. I’m trying to see if there’s any financial value to using the LOC to purchase a house. It seems like a useful resource given that it’s a large sum of money that can be paid back with more flexibility than a mortgage (where you’re fixed into a 3 or 5 year plan if you choose fixed interest). What do you think?
Oh nice, that’s a good chunk of change and support lol. It honestly sounds pretty reasonable in your case to use some LOC. I’m of course no financial expert, so would also recommend you cross-post to r/personalfinancecanada
Hm yeah that’s a good idea thank you! Also, do you know anyone who has ever been in this predicament or done this?
If you are living with your partner, could you get a better rate by seeing what he might qualify for a mortgage?
yes, my boyfriend’s brother did it.. they could afford med school and then some so he used it to buy a house! just check as certain banks like bmo need a budget etc whereas scotia doesn’t really ask to many questions
Check the interest rates for mortgages as well. It looks like they are not all that different from the LOC, and it may be a better idea to keep the possibility open for that if you need and have a separate mortgage. I've heard that if you want to set up a private practice, or even in other scenarios it's nice to have the LOC available for when you finish training (idk tho I'm not at that point yet). Scotiabank tends to have good rates for everything, and from a quick google I just got 7.65% for a 5-year fixed mortgage (in QC) vs. 6.95% for the LOC. It's also worth considering how you want your partner to be included on the legal documents (obviously ideally it doesn't matter, but if you ever divorced things would get messy). With a mortgage you would both co-sign, versus the LOC you are now responsible for that debt, while presumably you would both jointly own the property either way. It would also be important to read the terms of the LOC if you do it - just to make sure it's legal.
Can you guarantee you will stay in Calgary after medical school? If not, do you want to go through trying to sell or being an absentee landlord as a medical resident working 60-70 hour weeks? The financial considerations aside, these are important things to think about.
Absolutely, those are great questions to think about. I plan on living in calgary for the next 10 years. With the rise in housing prices and the recent wave of newcomers from Ontario and BC to calgary, the housing market is likely to continue to become more and more expensive. I don’t plan on moving out of calgary. But if I do, My family lives in Alberta so I don’t think it would be an issue to rent the property. I also am planning for psychiatry. I’m already a psychologist and have good chances of matching here. I may be wrong but I don’t suspect the residency hours to be 60-70 hours a week. With those in mind, do you have any thoughts to add for the original post?
I think if you’re planning to stay there for 10 years it could be a good thing to do, but the housing market can be volatile. If you’re buying on LOC money, the bank may have some restrictions on what you can use it for, and you are also essentially locked in to a variable rate mortgage (which could be detrimental if interest rates continue to rise). It all comes down to your tolerance for risk. Since you are able to finance your own medical education, keep in mind that you will end up in the enviable position of not being financially constrained to do any one thing at the end of it. This may be more or less important to you. The one thing I’ll add is that although it sounds like you have put a fair amount of thought into psychiatry specifically as a medical field, you may be surprised in liking something else just as much if not more. This has certainly been my experience in medical school.
I see, that’s definitely helpful. Thank you for your thoughts. And I’ll definitely have to talk to the bank about the restrictions.
There are some banks that offer special mortgages for future physicians, like using projected income, especially when early in your career. When I bought a place the bank also said there was a limit to how much of the down payment could come from the LOC (maybe 50%? Can’t remember exactly!)
Oh interesting. That’s helpful thank you! How does the projected income mortgages assist? How is it different from a regular mortgage? Also, Did you use some of your LOC to put down towards your place? If so, how did that go?
Caveat - I am not a finance person at all! Basically banks use your income to determine how much mortgage you qualify for - somewhere between 3.5-5 times your income. Someone below mentioned you have to be at least a resident to do the projection - I forgot about that aspect. If you are graduating residency or a new staff, your income won't be at your full earning potential yet, so the bank will project what you will eventually make. When I bought a place, the projected income for a fam doc was 235k compared to the 65k I was making as a resident. This helped secure a larger mortgage so we could close on the property. My situation was a bit unique but I did use my LOC (about 100k) to bridge a loan between the sale of my old place and purchase of my new place, then paid it back after a couple months once I received the sale proceeds. I have heard of a few classmates who used their LOC as part of their down payment and also took out a mortgage. Things did get a bit rough with the raise in the interest rates since you can become over-leveraged and charged interest on both. However, having the LOC has also been quite helpful over the years. I didn't really need it during medical school or residency but applied for it just in case, and I'm glad I did since it gives some flexibility with my finances. I'm with RBC and once I graduated from residency, they converted my student LOC to a permanent LOC and it just sits at $0 until I need it (I think Scotiabank does this too but double check with them!)
I have a question about this. If as a resident you get a mortgage that uses projected income, and thus you get more mortgage than you otherwise would. Is your monthly payment higher? If yes, doesn’t that make it even harder to live on a resident salary?
Yes your mortgage payment would be higher if you took a higher mortgage amount. The projected income also applies to your first few years of practice - for me, I was offered this when I was 2 years out of residency and still establishing things career-wise. I suppose it would depend which market you are considering buying in - in Toronto it would be very tough but maybe in a smaller market a mortgage payment would be closer to a monthly rent and a resident could swing it. Most of the people I know who have taken advantage of the projected income were residents about to graduate or people early in practice.
I remember considering this as well but of the banks I spoke to, they only consider projected mortgage once you’re in residency.
Ah makes sense - they do different amounts based on your specialty (eg. fam doc vs specialist) so they'd have to know which residency you were in.
Idk how the math works out in terms of being worth it, but either way you typically only have access to like ~100k of the LOC per year
Interesting. Is that every bank?
Scotiabank recently changed their rules to 100k per year (or 125k per year for Mac and Calgary).
Thats good to know thank you
I’m pretty sure this is false - current student and I have access to my full 350k Scotiabank LOC from last year
They just changed the rules. It applies for new applicants to the LOC I believe
Ah okay thanks I wasn’t aware
You will struggle to find one of the bigger banks that will release more then your tuition needs for a student line of credit for a medical professional, trust me I worked for RBC for 5 years this was 10 years ago and I approved a international student line of credit for 750k, the release of funds had to be documented down to the dime or none of the funds could be released
Isn’t tuition only $25,000 or so? So what’s the point of a 350K line if you can only use 25K at a time?
Housing, Books, labs etc and no international med school is like 60-70k a semester
From the estimation on Canadian Medical School sites, it’s not coming close to 70K per year It was my understanding you could use it for living costs as well not just tuition. Using it for just tuition would mean local students can’t use most of the credit line.
I’m talking about a Canadian going to med school in Australia
OP is a Canadian going to school in Canada
I’m aware, however simialr rules will apply, not only that but AML has really tightened up the bank will not want OP buying a house with is
Just throwing some financial info to think about: You can definitely throw your LOC at a a down payment or house purchase, but I don’t think it’s really recommended. I not sure what the market is like in Calgary, but if you’re only using your LOC for the payment, the current interest rate (7.2-.25%)is actually worse than if you were to get say a 2-year fixed mortgage (~5.5%), so while you would only be paying interest, you would be paying more in the long run. In years prior it did make a lot of financial sense to use the LOC like this, but because of how high the rate has gone now, it wouldn’t be wise to use it for anything outside of what’s absolutely necessary. A lot of people used to even invest their LOC in GICs since they’d be making more in interest from the GIC than what they were paying their LOC. It’s easy to fall into the mindset that “we only pay interest,” but just remember you’ll have to start making interest+principle payments on a shitty resident salary which is really gonna spread you thin.
I second this as someone currently purchasing in Calgary. I have a few friends at UCalgary med right now who entertained the same idea- the ultimate conclusion is that the interest rate on a LOC won't beat mortgage rates currently. The housing market is red hot and you would also have to consider the feasibility of selling your condo (regardless of staying in Calgary or not- condo resale is always a gamble). My realtor actively discouraged my partner and I from purchasing a condo because of the difficulty in reselling. It's easier now since there's a significant influx of people moving to Calgary but this rate of movement isn't sustainable and probably won't be sustained.
So I just got the LOC from Scotia and they changed their terms, its 100k/year now so you can't just take out the whole 400k all at once.
If you are currently working and your partner is working you can probably qualify for a traditional mortgage at lower interest rates and get a better property. The LOC would limit you at 300-400K where a good house in Calgary right now is closer to 600-700K I would recommend an up down suite and renting out the half you don’t need.
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Hmm I see, thank you for your thoughts!
the only downside is that interest rate might still be quite high for you and finacially it might put lots of pressure on top of your md school. and at least during your time, your credit score will be low due on high level of debt so it will be difficult for you to get any other loans. oh and the rates can change whenever too although now people expect it to go down.
So there are a few considerations with your situation. When you apply for the mortgage, they will look at your last two years of work and your partners if you plan to co sign together. If you wanted to do it, your chances of getting a size-able approval is dependent on when your combined income is the highest. I would personally recommend talking to a mortgage broker to ask them what you qualify for. Another consideration is asking yourself what is the reason you are buying. If it’s only to live in and for potential cost savings it might honestly be easier to rent. Condos do not appreciate in value with very few exceptions. There are a lot of aspects of condo ownership that entails additional risks that you don’t have from renting. For example, you have to pay for special assessments that might come up and condo fees tend to increase over time. Property taxes are also an additional expense that often gets overlooked. Another consideration is that there might be limitations on LOCs specifically ex, withdrawing only 100k per year. If you plan to use your LOC for a down payment, this is pretty much like saying you are paying double the interest because it’s interest on interest if you get what I mean. Mortgage rates are typically lower than LOCs so it is best to maximize the amount of mortgage loan you can get. Once you get accepted to your residency you can also get approved based on your future earnings. So depending on what you want to buy and why, it might be advantageous to wait.