Lifestyle | Become an owner for twins with a disability

A mother and her twin daughters with intellectual disabilities want to leave their apartment to finally have peace of mind.

The situation

Céline*, 51, is a single mother. If her oldest daughter is already flying on her own, her two 18-year-old twins with mild intellectual disabilities won’t be leaving the family nest anytime soon.

“I’m looking for a house for the three of us,” writes Céline. We want peace of mind and stop suffering the zeal of landlords with their rent increases and housing repossessions. »

Her daughters are full-time students at a center where they have a school-to-work (TEVA) transition plan. They do work placements two days a week, but are not paid. Their school career is difficult, and they will not succeed in obtaining a diploma of professional studies (DEP), she specifies. Consequently, Céline anticipates that her daughters will remain by her side for several years.

Céline, for her part, works in the public service. She has an annual income of $40,000 and the RREGOP defined benefit pension fund. At age 61, she will have accumulated 26 years of service. It is at this age that she plans to retire.

Before retiring from the job market, she wants to buy a property, the cost of which would be between $250,000 and $300,000. Not a condo or a mobile home, she says.

His rent currently costs him $1,000 a month. She estimates her monthly cost of living at $2,200, including a car payment of $450, including insurance.

Analysis

Before getting to the heart of the matter, Pierre-Raphaël Comeau, senior financial planning advisor at Laurentian Bank Securities, congratulates Céline on her good financial situation, with an emergency fund and no debt. It’s good news.

Retiring at 61 won’t be a problem for her, he points out, because she has a pension fund that will give her around 52% of her average income in her best five years. In order to maximize his savings, the specialist advises him to take part of his non-registered investments and put them in a TFSA. She will avoid paying tax on her investment income. The total amount will be $88,000 in 2023.

“She could keep around $10,000 in a high-interest savings account. »

Pierre-Raphaël Comeau also suggests that he consult Service Canada’s Benefits Finder website each year, which will allow him to find the federal and provincial programs that can help him.

“When his daughters are on the job market, they will be eligible for the Working Income Tax Benefit,” he says. There is even a special supplement for people with disabilities. »

Céline will also have to think of a will that takes into account the specific needs of the twins, such as a trust will for the administration of RDSPs and inheritance, for example. “We must prevent state benefits from being reduced as a result of inheritance. »

Is it possible to buy a house?

Now the bad news: in the current real estate market, it is impossible to find a single family home in good condition in the Montreal area between $250,000 and $300,000.

What if Céline managed to find a small condo with three bedrooms, located in the suburbs, near services for the twins, at $275,000?

“The down payment is not a problem,” emphasizes Pierre-Raphaël Comeau. She has savings. You could even catch up on your RRSP contributions with your non-registered investments and use the Home Buyers’ Plan (HBP) 90 days after purchasing the RRSPs. She could benefit from tax savings and additional social programs. That would be a really great strategy. »

But Celine would fail the test…

Pierre-Raphaël Comeau has done different scenarios. With a 10% down payment ($27,500), Celine would have to pay a monthly mortgage of $1,468 per month, including the premium from Canada Mortgage and Housing Corporation (CMHC). This amount is based on an interest rate of 4.89% fixed over 5 years. But with the famous stress test, Celine must qualify at 6.89%, or the current interest rate of 4.89% + 2 percentage points.

All lenders pass the stress test to new borrowers. We want to make sure they can make their monthly payments even if interest rates go up again.

And there is yet another test, continues Pierre-Raphaël Comeau, that of the gross debt amortization ratio (ABD).

“By taking the total amount of housing-related expenses (mortgage payment, municipal and school taxes, electricity and heating costs, 50% of condominium fees) which I divide by Céline’s gross income x 100, the ratio is too high. I arrive at 61%, and we must not exceed 39%, ”he specifies.

Pierre-Raphaël Comeau redid the calculations with a 20% down payment ($55,000), which avoids the CMHC. However, Celine fails once again. The ABD is 54%, calculates the expert.

To buy the condo, he would need an income of at least $68,000 per year.

“A mortgage should be three to four times the annual income of the people paying it,” he says.

Some Solutions

Since Celine’s main problem is her salary, she might consider a career move and get a higher one. It would thus have a better chance of passing the tests to obtain financing. “There is a lack of employees everywhere within the public service,” recalls Pierre-Raphaël Comeau. Her pension fund would follow her. And since the pension income is based on the average of the best five years, she would have a better pension as a bonus. »

She could also buy a duplex with another family member. Or, find an apartment with a friendlier owner while waiting to see what his daughters will do in the next few years. “Their problem seems to be more the relationship with their landlord than living in an apartment. Buying a condo will be much more expensive than the worst rent increase. »

In the current market and 10 years from retirement, the expert comes to the conclusion that this is not the time to undertake a project that would require almost all of his savings. “It’s not because you are an owner that you buy peace of mind, he specifies. There are always repairs to be made and maintenance. »