Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }
Coronavirus information
Coronavirus information
The Zero Canada Project provides resources to help you make the most of staying home.
Visit the hub

Matt and Ashley.

Handout

For years, Ashley and Matt travelled the world – frugally, mind you – he as a freelance travel writer, she as a photojournalist. He is 29, she is 30. Between them, they were bringing in about $95,000 a year. All the while, they saved and invested their money, planning to buy a home of their own when they returned to Toronto.

“We were hunting for a condo in February amidst the insanely hot market, but were outbid several times,” Matt writes in an e-mail. Then the novel coronavirus struck and their freelance income vanished overnight. They gave up the apartment they had been subletting and moved in with his parents, who live in a small town a couple of hours away.

“Before this happened, and now more than ever, we desperately want a place of our own,” Matt writes. They have about $105,400 in stocks and cash – less than what they had a couple of months ago before the stock market dropped.

Story continues below advertisement

“Before the pandemic, we worked with a private mortgage broker, who said we were pre-approved for a mortgage of $520,000,” Matt adds. “I just spoke with him today and he said even though we were pre-approved, at this moment we probably won’t get anything as the bank will ask about our current income.”

Their dilemma: “Do we buy stocks with our cash to make more on an eventual [stock market] rebound?” he asks. “Or do we sell when things are looking decent so we can have some liquidity when we hope to buy a condo?”

In the meantime, they have applied for the Canada Emergency Response Benefit, which provides relief of up to $2,000 a month each for up to four months.

We asked Warren MacKenzie, head of financial planning at Optimize Wealth Management in Toronto, to look at Matt and Ashley’s situation.

What the expert says

If Matt and Ashley are determined to buy a condo in the next year or so, they will have to find steady work to show they can afford to pay the mortgage, Mr. MacKenzie says. With rents and real estate prices easing, banks are tightening up their lending criteria. A 20-per-cent down payment – they’re looking at units in the $500,000 range – doesn’t carry the weight it once might have, the planner says.

Equally important, they have to secure their down payment, the planner says. As it stands, they have about 65 per cent of their savings in stocks and 35 per cent in cash. “Matt and Ashley have expressed some reluctance to sell their favourite stocks and move heavily into cash,” he says.

“If they want to guarantee they have their down payment, they have to give up the possible gains from a market rebound,” Mr. MacKenzie says. “They need to sell their stocks today.” Given the prospects for the economy, stock markets could fall substantially before long, the planner says. “If it were me, I would have sold a few weeks ago.”

Story continues below advertisement

Even in normal times, “the stock market is not the place to be if the money will be needed in a fairly short period of time,” the planner says. “And these are not normal times.”

Because their income is related to the travel industry, Ashley and Matt are realistic in saying it might be a year or more before they are again fully employed. “Their jobs are not high-paying, but they like their work, and in a perfect world they would like to continue doing the work they enjoy.”

In the meantime, “without steady employment it’s unlikely they would qualify for the mortgage that is essential for them to buy the home that they want,” he says.

Given the situation, Matt and Ashley have a number of options, the planner says. “They could give up the idea of buying their own home, try to get some part-time work, or use their savings to survive until they can go back to the work they enjoy,” he says. Or they could take any kind of job, even as a clerk or delivery person, and try to get preapproved for a mortgage again.

Alternatively, they could give up the idea of purchasing a condo for the time being and use their $105,400 savings to retrain themselves for a different career – perhaps one where there is greater security and incomes are expected to be higher, the planner says.

Another possibility would be to look for a “vendor take-back” mortgage. This would be good for Ashley and Matt and it could also be attractive for the vendor. If it becomes a buyers’ market in condos this would make it easier for the vendor to sell the condo and would allow him or her to enjoy a guaranteed return on a fully secured investment, which might be double what could be earned on a guaranteed investment certificate. The couple might agree to a five- to seven-year term, by which time they should be able to qualify for a conventional mortgage.

Story continues below advertisement

Or Matt and Ashley could consider buying in a place where home prices are less expensive, their down payment would go further and their mortgage payments would be lower. “They could try to get approved for a less expensive ‘fixer-upper’ home,” the planner says. “Over the next year, while they’re waiting for their work to reappear, they could fix up their home and then either keep it or sell it for a profit.”

Matt and Ashley’s unemployment situation is going to force them to make some tough choices, Mr. MacKenzie says. “On the bright side, there is a possibility that 20 years from now they might look back and say they’re better off because of the choices that COVID-19 forced them to make,” he says. When they’re finally able to buy, real estate prices could be lower than they are today. “Learning to make difficult choices is an important life skill and one that may benefit them for years to come.”

Client situation

The people: Matt, 29, and Ashley, 30

The problem: They desperately want a home of their own, but their income has dried up and they can no longer get a mortgage. Should they use their cash to buy more stock or sell the stock they have to lock in their down payment?

The plan: Sell the stock, get some kind of work and try again in a year or so to get preapproved for a mortgage. Consider a range of alternatives, including giving up on buying a home or looking in a less expensive city.

Story continues below advertisement

The payoff: Learning to limit risk and to keep an open mind in uncertain times.

Monthly net income (previous year): $7,250

Assets: Cash in bank $13,200; stocks $51,000; his TFSA $2,200; her TFSA $20,000; his RRSP $19,000. Total: $105,400.

Monthly outlays (previous year): Rent $1,200; transit $120; groceries $400; vacation, travel $1,000; dining, drinks, entertainment $500; personal care $50; club memberships $100; subscriptions $100; cellphone $90. Total: $3,560. Surplus had been going to savings.

Liabilities: None

Want a free financial facelift? E-mail finfacelift@gmail.com.

Story continues below advertisement

Some details may be changed to protect the privacy of the persons profiled.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies