Boomer vs. Junior: The pros and cons of home ownership

Posted by:

Oliver Po

Century 21 In Town Realty

in Downtown Vancouver

Cell  778-898-5153


"Home ownership gives you security, especially in retirement"

By Jonathan Chevreau

OVER THE YEARS, I've talked to various personal finance experts who say that home ownership is overrated and that renting an work out to be cheapter. But ask these same experts what they're doing personally, and you'll find out that many have still chosen to own their own home. Why? If you're like me and have an eye on financial independence, the reason is perfectly clear: By the time you stop working - either in semi-retirement or full retirement - you want a fully paid-up home to minimize the drain on future cash flow. True, you'll still have to pay property taxes and, if you're a condo owner, maintenance fees. But these costs typically work out to be less than half the outlay of renting. More to the point, you'll never face a rental increase.

But the financial benefits of ownership are only part of the story. There are intangibles too, such as pride of ownership and the innate human need to own a patch of land. Call this the Scarlett O'Hara factor: If the economy really tanks, homeowners can at least grow vegetables in their yards. There are other benefits. Home ownership - whether or not the mortgage is paid off - can help you secure credit in an emergency. Since there are no capital gains taxes on a principal residence, a home is also a tax shelter. And once old age arrives, a home can generate funds through a reverse mortgage. Not that you want to do that if you can avoid it. After all, the final benefit of a home is that you can make it a gift when you ultimately pass on.

Jonathan Chevreau's book Findependence Day is available at

"invest the money you save by renting and you'll build real wealth"

By Garry Marr

Yes, it's financial heresy to say this, but owning a home makes no financial sense. Yet, For whatever reason, Canadians buy into the idea that a house is only a home if we own it; rent is for nomads.

But is home ownership really worth it? Let's do some math. The federal government "toughened" rules for homebuyers in October, and Canadians are now required to come up with down payments of at least 5%. Mortgage amortization periods have also been capped at 35 years. Say you're 30 and buy a $400,000 home on these terms. Assuming 5.5% interest and monthly payments, you'll pay $470,367 in mortgage interest by age 65. A $400,000 home for $870,000 - what joy.

Now suppose you rent. According to Canada Mortgage and Housing Corp., the average three-bedroom apartment in the Greater Toronto Area, for example, rented for $1,252-a-month in 2007. That's about $800 less than the $2,025 it would cost to carry the mortgage mentioned above. Subtract costs for property taxes, utilities and maintenance, and you'll easily save $1,250 a month by renting. Invest that money, even at a minimal 4% return, and you'll have $1.1 million after 35 years.

The numbers speak for themselves. In fact, there is only one argument for home ownership that makes sense: It's a form of forced savings. Renting is cheaper, but most people seem to spend the savings on frivolous items. And maybe that's why I have to make a confession here: I own a home, too.


Jonathan Chevreau and Garry Marr, Financial Post Magazine

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