lifestyle |  Coexistence project: what to do with the houses of others?

lifestyle | Coexistence project: what to do with the houses of others?

When a couple wants to live together, they have several choices to make. If you buy a new house to settle down, you will have to decide what will happen to everyone’s residences. Should we sell them or keep them in case coexistence is not as harmonious as we hope?

Posted at 7:00 am

Martine Letarte

Martine Letarte
special cooperation

The situation

Pascal*, 40, and Brigitte*, 52, are a couple who see each other mainly on weekends at the moment. But they want to live together. Brigitte has a daughter (19) in joint custody and Pascal has two daughters (12 and 14), also in joint custody. By moving in with his spouse, he would lose about $400 a month in benefits and family allowances until his daughters turn 18.

Pascal and Brigitte each have their own house, but intend to buy one together. They are also pre-approved for a $600,000 mortgage.

They are considering different scenarios, such as each one keeping their house, renting it and thus having the possibility of returning there if they ever separate. They figure they could get about $1,800 a month for Brigitte’s and $2,200 a month for Pascal’s, which would more than cover the mortgage and other costs. In addition, they could deduct from the rental income various costs of these properties, including mortgage interest. Eventually, if they need cash, they could sell one or both properties.

Another option being considered is for Pascal to sell his house immediately; in case of a separation, he could keep the news and Brigitte would return to live in her house.

One thing is certain, the couple now wants to grow their money. Brigitte and Pascal are not saving at the moment, but they have the ability to invest about $300 each per month. They also want to leave a legacy for their children, but the most important thing is that Pascal can retire soon, in 10 or 15 years.

“I want to enjoy life with my girlfriend while we’re both fit and not too exhausted from work,” he says.

The numbers

Paschal, 40 years old

Annual salary: $106,000
House: value of approximately $450,000, with a mortgage balance of $150,000
Pension plan: right to early retirement with a reduced pension in 2037 (at age 55)
Travel budget: between $7,000 and $10,000 per year
Without savings
Possibility of receiving a long-term inheritance

Bridget, 52 years old

Annual Salary: $118,000
House: Approximate value of $325,000, with mortgage balance of $170,000
Pension plan: right to a full pension in 2026 (at age 55)
Travel budget: between $7,000 and $10,000 per year
Without savings
Possibility of receiving a long-term inheritance

keep both houses

There are many possible scenarios for this couple. Simon Préfontaine, financial planner at Lafond Financial Services, has doubts about the option he prefers, which is to keep the two houses to rent them and be able to return to them if the coexistence is ever not as harmonious as expected.

“If the houses are rented, they will have 12-month leases, so they won’t be able to move back into them quickly,” he says. Most people sell everything in a situation like that, live together, then if that doesn’t work, they go back to buy something. It’s more simple. »

However, he made the retirement projection considering that the couple is buying a new house and that each maintains his own and rents it. Also, since Pascal and Brigitte have similar incomes, he split the expenses of the new house half and half.


Simon Préfontaine, financial planner at Lafond Financial Services

To make his projection, Simon Préfontaine took the scenario according to which Pascal retires early with penalty in 2037, therefore at the age of 55. For Brigitte, she’s also supposed to take it at age 55, in 2026. The financial planner also took into consideration that they’re now starting to save $300 a month each in a Registered Retirement Savings Plan (RRSP) and it’s all put into place. in a balanced portfolio. He also considered the legacies the two might have in the long run. Results ? They will have the equivalent each year of $92,000 in today’s dollars after taxes following the recommendations on life expectancy of the Institut québécois de planning financier (96 years for Brigitte and 94 for Pascal).

“To make their decision, the couple can take this basic scenario and change different variables, such as retirement age and home sale, and then see the impact,” says Simon Préfontaine.

The price to pay for Pascal

The financial planner emphasizes however that if Pascal is lucky enough to stop working 10 years before his normal pension, this has a price to pay. If he continued to work until age 60, he would retire early with an unreduced pension. The couple would have about $17,000 more per year after taxes, or $109,000.

“Typically, ages 55 to 65 make more money, so by retiring early, the couple would sacrifice those years,” says the financial planner. So, if the couple doesn’t work out and Pascal wants to return to the job market, he runs the risk of not finding the same conditions at this age as if he had stayed at work. But it’s 15 years from now, so she has time to see how things evolve in their relationship. »

Then there’s the $400 a month in benefits and family allowances you’d lose by living with your spouse. “Pascal could ask his accountant to calculate each year how much more he would receive from the government if he lived alone,” says Simon Préfontaine. This will fluctuate when his eldest daughter turns 18. The idea is that the couple is very aware of this price to pay for Pascal. Thus, Brigitte and Pascal will be able to discuss it and, if necessary, make the necessary adjustments in the distribution of their expenses. The goal is to have as few irritants as possible, because money is the number one cause of couples breaking up. »

Sell ​​one house or both

Deciding whether or not to sell their homes remains a big question Pascal and Brigitte have to think about. Financially, if the couple maintains an annual lifestyle of $92,000 in today’s dollars, they would not need to sell.

“Pascal and Brigitte will be able to benefit from the rental income once the mortgages are paid, but not from the capital, indicates Simon Préfontaine. It is your children who will benefit from the inheritance. »

But the big question to ask is whether the couple really wants to get into the rental business. “I often tell my clients that it’s like having a part-time job,” says the financial planner. If they want to do that, fine. But otherwise, these are concerns to be avoided. »

Also, selling the houses would give them more financial flexibility. “They could do whatever they wanted with these additional sums of money, specifies Simon Préfontaine. It’s also easier to sell your house when you live in it, because no one takes better care of a house than its owner. But we are far from being solely on financial issues. This couple really needs to consider the emotional side to be at peace with their decision. »

* Although the case highlighted in this section is real, the names used are fictitious.

calling everyone

Are you planning a project that requires smart use of your money? Do you have financial problems?

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