Match Day 2023 is almost here and the adventure of residency awaits you. After the celebration ends, you will be tasked with moving to a new state and figuring out where you are going to live – and having to do it VERY quickly!
Residency marks a big change in your life. Does that giant shift mean that it’s time to invest in a home? Many medical students preparing for the transition to residency ask themselves that question, and it’s not one that should be taken lightly.
Here are a few reasons why buying a home to live in during your residency could be a smart decision that will help you reach your financial goals
1. You may extend training beyond residency
If you plan to stay at the institution where you did residency, it may make sense to buy instead of rent.
There is some risk with this scenario, as you still have to match to fellowship in the location where you bought the house, but if you apply to multiple programs in each city, it can help ensure that you will end up staying put for fellowship and make home ownership work in your favor for the long run.
Analyze what your chances of extending training are and how likely you are to stay in the same city. If the chances are high that you may be in one place for 5 years or more, it may make sense to buy instead of rent as the time will give you a good opportunity to build equity.
2. Opportunity for future cash flow
If you are single and in a long training program (5 years or more), then getting a roommate while owning a property can give you extra cash in your pocket every month. This comes with the stipulation that you must be okay having a roommate or someone living in your house. You must also be okay with keeping up with maintenance. If those things don’t bother you then you can potentially make extra money off of the purchase in certain markets after you eventually move. There are hundreds of website, blogs, and postings about physicians who love to invest in real estate. If this is something you know and something that you desire to eventually do (become a landlord), then do your homework and consider staring early.
3. More stability for your family
If a house is affordable and your spouse has a reliable job, its not unreasonable to consider purchasing a place to live, especially if you have a longer residency. It’s not realistic to put life on hold and to ask the family to take on extra burden to live in a studio apartment in some locations. Take your family’s needs into consideration for living arrangements. They should be a priority as they are supporting you though one of the hardest times of your life. Discuss what their needs and wants are as a partnership and family – but do so realistically.
4. Owning a home may give you more satisfaction than renting
Even if after crunching the numbers and spending time on rent vs own calculators, you may decide it’s worth having a place of your own where memories can be built.
Even if after you meet with a mortgage advisor and you realize you may come slightly behind with renting, the emotional factor of owning a home may be worth it to you. Not everyone focuses solely on the bottom line for every life purchase. It might not make you rich but there might be a wealth of reasons to purchase a home as a resident.
5. Tax breaks!
The money paid in mortgage interest can be deducted from your taxes. You will have to possibly talk with your accountant or run the numbers yourself to see if this benefit will actually have any impact on your decision to buy vs rent. In many cases, the tax break of owning a home is not a large factor in building wealth or making buying a better financial decision.
6. Building equity
Most mortgage payments in the beginning apply to the interest and not principle. Over the course of 5 years or more its likely you will build some equity in the place that you have bought.
When selling the house, this equity will be paid to you if the selling price is more than what is currently owed. There is a risk that the price of the house may go down, but even if the house stays the same price each payment builds a little equity in the house.
7. Home prices are only going to go up
Do not expect home prices to go down. While prices may appreciate at a lower rate than they have over the last three years, real estate in the United States always trends upward. Nothing is for certain, but if you look at historical home price data, the home you would purchase now to live in during residency is going to be more expensive when your training is finished.
7. You can get into a home with a lower cost using a Physician home loan
A physician mortgage loan is a special type of loan designed for the unique needs of doctors. Doctors traditionally earn a high income or expect to earn a high income in the near future, but they can sometimes find themselves with no cash, little credit, and high debt, especially if they’ve just graduated from medical school or just finished with residency.
The Bottom Line
With a lot of hard work behind you, Match Day starts a new chapter in your career and life. As you get ready to begin your residency and look for a new place to call home, let us help you make the process less stressful and more enjoyable.
Whether you’re looking to move now or in a few months, we will work with you to choose a mortgage program that fits your timeline, meets all your needs, and helps you reach your financial goals.
If you would like to own a home during your residency a low-down payment physician home loan, fill out the form below to request a consultation with a mortgage advisor and start the pre-qualification process.