Jenna is pretty typical — except for one thing
By the numbers, Jenna looks like a lot of Millennials. She's 25, graduated from university two years ago, and pays $321 a month in student loan debt. Her interests include bike riding, guitar, Saturday brunch, and beer tastings. She works as a sales manager for an international food distribution company and rents an apartment in downtown Calgary.
One thing that's not typical about Jenna: she just bought a house. With lots of news coverage about how Millennials can't afford to buy homes, it might seem like she's ahead of the curve. I asked her why and how she did it.
Saving money was the biggest reason
"My friend Mike just bought a house and his mortgage is $300 less than his rent. When I heard that, I was definitely interested," Jenna said. She currently pays $1,440 a month in rent.
She already had enough for a 5% down payment
Jenna used a financial calculator to figure out if she should buy now or wait to save for a bigger down payment. "My dad really wanted me to save enough to put 20% down. But I showed him that it could take me eight years to save that much money. In that time, I could build up $63,000 in equity or spend $140,000 in rent payments," she explained.
Student loan debt actually helped
Jenna has been paying her student loan every month since she graduated in 2019. "My mortgage broker said that because I'd been paying consistently, it worked in my favour and boosted my credit score. He also said it showed I can stay focused and live within a budget," she said.
Credit history started at 18
Thanks to her mom's advice, Jenna applied for a credit card when she turned 18, used it, and paid it off every month. Her credit score is now in the high 700s.
Mortgage insurance let her keep savings in reserve
"Okay, one of the reasons my dad wanted me to save for a 20% down payment was so I'd avoid paying mortgage insurance," Jenna explained. "Maybe I could have put more down, but I didn't want to empty my savings. What if something breaks in my new house? Or what if I want to buy a new sofa? Mortgage insurance — the premium you pay when you put down less than 20% — helped me buy my house with only 5% down and still have cash left over."
What you can do next
If you're 25 (or any age) and wondering whether you're ready to buy, run the numbers yourself. Compare what you're paying in rent to what a mortgage could cost. Look at how long it would take to save a bigger down payment versus how much equity you could build — or rent you could spend — in that same time. And if you've been paying down student debt or building credit, that's already working in your favour. You might be closer than you think.
