Personal Finance

Is home ownership worth it?

  • Last Updated:
  • Feb 18th, 2021 4:12 pm
[OP]
Sr. Member
Jun 4, 2007
835 posts
205 upvotes

Is home ownership worth it?

My husband and I have a mortgage of approx 300k, our house in the current market is worth about 1 or 1.1 million. We have all the typical expenses, including property taxes approx 525 a month. This year we replaced some appliances, a furnace, AC unit coming in the spring and planning a large landscaping project for the summer for our front entrance.

Honestly, as is normal with home ownership the list of projects or 'must replace' items seems never ending. I often wonder if selling and renting (where the landlord can worry about these expenses) is a better option. I mean we can sell and invest and (not touch) our equity in the current house. We have 2 youngish kids to put through post secondary school. This plan honestly, seems to make 'some' sense. But getting out of the housing market is scary. Anyone choose to rent when they can buy?
66 replies
Sr. Member
Apr 5, 2017
826 posts
591 upvotes
Edmonton, AB
I'm choosing to downsize. As well as my mother and a couple other family friends. From single detached homes to semi suburban condos no older than 6-8 years for easier/efficient living and not having to worry about heating a giant box and utilizing only maybe 20-30% of the space.

Homes are too much, utilities keep going up, property tax, maintenance, home maintenance supplies are going up, lumber prices, etc. carbon taxes are going to keep increasing as well.

Not everyone can rent their place out either. Where I live, good luck finding decent tenants right now.

If you sell and cash out, I'd imagine the market you reside in, it would be very painful to buy back in. Might be good to keep crunching numbers while still being in a comfortable position.

On a positive note some do enjoy home ownership and improving their homes even in small incremental ways. Look at it as a small business or a place from which you can do business.
Deal Addict
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Mar 30, 2010
2960 posts
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Kagaaruk, NU
Have you considered downsizing to a new construction?

Your mortgage may be reduced and you wouldn't have to worry about upkeep for at least the first 10 years.
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Deal Addict
Dec 28, 2007
1018 posts
546 upvotes
How much will it cost you to rent something decent in your area? Or would you consider moving to a less expensive market? Your $700k of equity could buy a house in a lot of places with money left over.

I sold my condo in Calgary in 2008 and rented for about 10 years before buying a house a few years ago. Renting worked out well overall, as it freed up money to invest and made it easier to take an opportunity to move to a different province. (Moving was also less expensive with no realtor or legal fees.) I just had a look at realtor.ca and similar condos in the same building are listed for less than I sold mine 13 years ago. Real estate doesn't always go up.

The main downside to renting (and one of the reasons we decided to go back to homeownership) was being 'forced' to move out of both of our rentals due to landlords selling their properties. Things eventually worked out well in each case, but it was very stressful at the time to have to move on someone else's schedule. Also, we had to live with some things in each rental we probably would have improved if it was our own home (e.g. old appliances, minimal landscaping). The other reason for buying our current house is that the rental market in our area significantly tightened during the previous ~5 years we'd been renting. Quality rental properties were hard to find and much more expensive than what we had been paying, so it made more sense to buy than rent at that time.
Jr. Member
Dec 8, 2020
176 posts
107 upvotes
OP and the reason you bought in the first place was .....?

you have given your kids a home, a safe familiar place to live in surroundings they'll likely treasue for the rest of their lives.

you are lets say about 10 or so years from being mortgage free, the kids may be gone, you'll hopefully be empty nesters in your 50's ... that could be the freedom [retirement] to do what you did when you first started out as a couple.

rethink this, after being home owners then renting by choice is not the same as home ownership.

stick it out, do the home ownership small stuff such as all the maintenance & upkeep, your property may be worth $1.5 million+ 10 years from now.

10 years or so will come so fast, start planning today what you'll do 10 years from now, ranging from downsizing, condo living etc.
Last edited by Janus2faced on Feb 14th, 2021 8:24 am, edited 1 time in total.
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set a limit, play within it.
Deal Expert
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Feb 8, 2014
18933 posts
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Socially Distanced
The grass is always greener on the other side.

You are building equity and will likely end up ahead if you stay where you are.
That said i don't know your financial situation or your life goals or even your location, but in general home ownership is more cost effective than renting. Have you done the math?
In fact in Rand McNally they wear hats on their feet and hamburders eat people
Deal Fanatic
Dec 5, 2006
9207 posts
4497 upvotes
Markham
porticoman2 wrote: OP and the reason you bought in the first place was .....?

you have given your kids a home, a safe familiar place to live in surroundings they'll likely treasue for the rest of their lives.

you are lets say about 10 or so years from being mortgage free, the kids may be gone, you'll hopefully be empty nesters in your 50's ... that could be the freedom [retirement] to do what you did when you first started out as a couple.

rethink this, after being home owners then renting by choice is not the same as home ownership.

stick it out, do the home ownership small stuff such as all the maintenance & upkeep, your property may be worth $1.5 million+ 10 years from now.

10 years or so will come so fast, start planning today what you'll do 10 years from now, ranging from downsizing, condo living etc.
Yep

There are two reasons I bought my house
1: feel like a family /home
2: have privilege playing with my son in backyard. At least can leave something for him in the future

Otherwise, I would just rent a condo in downtown Toronto
[OP]
Sr. Member
Jun 4, 2007
835 posts
205 upvotes
Thanks for the replies.

Our area is very suburban and quality rentals are likely hard to find. We would want a detached home.

Yes we bought a house to build equity. I'm thankful for that as we would never have had this equity to consider as part of our retirement. This is our second home and it's great to see our 'investment' grow the way it has. I think as suggested it is wise to stay.

However, as I mentioned when I add up all the money tied up to maintain a home it was tempting to be in a situation where you don't have those expenses.

In about 10 years we will be in a position to downsize without uprooting the kids from their school and friends, if we chose to.
Deal Expert
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Aug 18, 2005
20029 posts
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Burlington-Hamilton
When you own your home, you're largely fixing your cost of living. In 20 years, your mortgage will be gone. Do you think rent will be flat over 20 years?
What if there were no hypothetical questions?
Deal Addict
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Mar 9, 2012
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Kitchener
Renting and owning both have their perks and downsides.

For owning: This is your property and is an asset, and most likely will increase in value. What you put in you usually get back and then some. Pride in ownership; most people who own usually take better care of their property/unit (such as a condo townhome). You have control on how your interior looks. You also have a lot more privacy. Especially true if you're in a single detached home. Lots of backyard for summer BBQ's and having friends and family over and playing some tunes, perhaps sitting around a fire. If you own long enough, your living costs can be significantly lower than renting - especially if not in a condo.

Main problems are maintenance costs and labour involved (unless it's a condo, they you have higher maintenance costs but zero labour). Most owned homes are larger and therefore have other higher costs, such as tax burden, heating/cooking costs. Appliance replacements. And selling your house is a pain in the ass, and costs you tens of thousands.

For renting: Anything that goes wrong, assuming you didn't intentionally break, not your issue. Broken oven? Not your problem. Leaky faucet? Not your problem. Roof needs replacing? Not your problem. Snow storm leaves behind 60cm of heavy snow? Not your problem. Initial costs are usually lower than owning a home. Utilities are usually a lot cheaper, if not free. You want to leave? You give your notice, no lawyers, no problems (assuming you treated the unit good).

Main problems: You're putting money into someone else's pocket. Rent prices only go up. You can end up with a bad landlord (broken appliance? you might have to wait). You could be dealing with other tenants who might not actually have any interest in being decent humans. Make sure you're on the top floor of a solid construction building. Obviously you are constrained when it comes to decorating and any major changes.

Not an exhaustive list. Personally, if I had $700,000 of equity, I would downsize into a smaller home, have no mortgage, and less property taxes. That would be a lot cheaper than renting, and still have the benefits of being a homeowner.
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Deal Guru
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Sep 21, 2010
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Montréal
I would never consider renting if there's a realistic chance I don't need to. There's no equity (obviously) but the main thing is that you're not in control, the landlord can increase your rent whenever and can kick you out whenever (generally-speaking). That lack of control is already too much of a hurdle so no need for me to consider anything else.
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Deal Addict
Jan 15, 2017
3745 posts
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OP, you've hit on the one thing that very few people openly talk about - it costs money to own a home. Sometimes, a lot of money.

Equity is nice but for most of us equity is just a number on paper whereas those repair and maintenance costs are money out of our pocket. Every repair and maintenance cost is a reduction in equity as every time you shell out more money you are actually increasing your overall costs. And it can seem like a double edge sword to own a home that needs repairs - do you pay for the repairs and invest more or sell for a home needing fewer repairs and pay all the selling/moving costs?
Jr. Member
Dec 8, 2020
176 posts
107 upvotes
hjello wrote:
Yes we bought a house to build equity. I'm thankful for that as we would never have had this equity to consider as part of our retirement. This is our second home and it's great to see our 'investment' grow the way it has. I think as suggested it is wise to stay.

However, as I mentioned when I add up all the money tied up to maintain a home it was tempting to be in a situation where you don't have those expenses.
number crunching, I'm sure you've done some.

take the $300k balance of the mortgage, look at the amortization table to see how much interest you will pay from now to when you'll be mortgage free.

knowing the amount of interest & the time to zero, divide that number by the number of years to get to the dollar per year average in interest paid.

now look at the property tax, take what you think your property tax will be from now till the mortgage free date, again divide that by the number of years to get to an average per year.

then take the $700k invested at 5% in a Canadian dividend investment, assume zero growth, zero tax on the dividend because the income is split between the two of you & can claim dividend tax credit.

*average interest/yr + average property tax/yr = $x saved in money that goes out the window

*income from the investment @ 5% = $35000/yr

add those two line item numbers together

then look at a house rental cost, what the rent is for the next 10 years, add in inflation to get to the average rent/year.

will the 10 year plan meet your financial (only) objective?

then do the same for 20, 30 years

in doing this, keep in mind that your current property will increase 2%/yr

10 year growth potential, taking $1 million asset @ 2%/yr compounded growth = $1,218,994, now thats based on simple inflation increase, not what might happen to the real market increases or decreases.

lets say you stick with staying put, sometime in the future you are mortgage free, you downsize, have approx 20% free cash flow from the downsize. You could take that, invest in safe'ish for say 5% return.

or do the going full on rental, take the mortgage free sale money $1.2 million invested at 5%, go rent, travel the globe ... do whatever

.
Last edited by Janus2faced on Feb 14th, 2021 2:41 pm, edited 2 times in total.
.............................................

set a limit, play within it.
Deal Addict
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Mar 23, 2011
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hjello wrote: Thanks for the replies.

Our area is very suburban and quality rentals are likely hard to find. We would want a detached home.

Yes we bought a house to build equity. I'm thankful for that as we would never have had this equity to consider as part of our retirement. This is our second home and it's great to see our 'investment' grow the way it has. I think as suggested it is wise to stay.

However, as I mentioned when I add up all the money tied up to maintain a home it was tempting to be in a situation where you don't have those expenses.

In about 10 years we will be in a position to downsize without uprooting the kids from their school and friends, if we chose to.
If you stay where you are in 10 years you will look at what you can sell your place for and be thankful you stayed. As you pay you house down, spend the more and enjoy life more or invest it so that if you downsize you can buy whatever you want.
As others have mentioned, renting in the longrun doesn't make sense especially if you can afford to own.
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Sr. Member
May 5, 2006
748 posts
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Jucius Maximus wrote: When you own your home, you're largely fixing your cost of living. In 20 years, your mortgage will be gone. Do you think rent will be flat over 20 years?
This is my main reason for owning a home. But also, for me, the mental stability of having some control over where I live (owner sells rental, dependant on them for repairs, etc.) Recall that many expenses in a home are elective. You don't have to renovate (or in your case, landscape). Keeping up with repairs is pretty much it, with the large expenses being roofing and HVAC every now and then.
Deal Guru
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Jan 9, 2011
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Vancouver
Jucius Maximus wrote: When you own your home, you're largely fixing your cost of living. In 20 years, your mortgage will be gone. Do you think rent will be flat over 20 years?
It depends on the difference between the cost of renting and the cost of buying. The differential is not the same in every market. Imagine if a home that cost $5 million to buy could be rented for $1/month. Is it still a smarter financial decision to buy rather than rent? Obviously not. So at what level of monthly rent does it make more sense to buy that $5M house? $10? $100? $1,000? $10,000? You have to do the math.
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Aug 18, 2005
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Burlington-Hamilton
randomthoughts wrote: This is my main reason for owning a home. But also, for me, the mental stability of having some control over where I live (owner sells rental, dependant on them for repairs, etc.) Recall that many expenses in a home are elective. You don't have to renovate (or in your case, landscape). Keeping up with repairs is pretty much it, with the large expenses being roofing and HVAC every now and then.
Yes. I was told by a realtor to prepare to spend an average of 1% of the house's price per year in maintenance and repairs.
Some years will be higher than others (roof, furnace, A/C, etc.,) but prepare for an average of 1%.
As such, I save a fixed amount of my paycheque every single week, into a sinking fund. That fund is 5 figures now.

I think a lot of people don't plan this far ahead, and the get caught in these traps with financed roofs, leased furnances, leased A/C unit, etc. You have to stay ahead of the snowball. Otherwise, that snowball will be chasing you, and you'll end up falling flat on your face when it runs you over.
Kiraly wrote: It depends on the difference between the cost of renting and the cost of buying. The differential is not the same in every market. Imagine if a home that cost $5 million to buy could be rented for $1/month. Is it still a smarter financial decision to buy rather than rent? Obviously not. So at what level of monthly rent does it make more sense to buy that $5M house? $10? $100? $1,000? $10,000? You have to do the math.
Obviously this is an extreme example, as I don't know why someone owning a $5M home would rent it for $1/mo.
If it's a short term thing, I can see why renting would be cheaper, as buying and selling certainly have costs like LTT, lawyer, realtor fees, etc.
But over the longer scope of time, buying is probably going to win out in most scenarios.
Last edited by Jucius Maximus on Feb 14th, 2021 3:23 pm, edited 1 time in total.
What if there were no hypothetical questions?
Deal Guru
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Jan 9, 2011
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Vancouver
Jucius Maximus wrote: Obviously this is an extreme example, as I don't know why someone owning a $5M home would rent it for $1/mo.
It was just to illustrate that buying is not always better than renting, which is of course what realtors would have you believe. You need to examine all the factors and crunch some numbers.
Jr. Member
Mar 12, 2006
180 posts
139 upvotes
Here is our not so extreme, personal example:

We have been renting in a well maintained Toronto building for the past 20 years. Haven't moved since 2008.

The current rent due to Ontario's rent control is about 40% lower than the market rent for the same apartment and about 20% of our after tax income. Two adult kids already in university or working.

Any money we save is being invested in a balanced diversified portfolio, we both have defined benefit pensions, and planning to retire and have investment properties abroad.

In our case, it does not make sense to purchase a property in Toronto and we have crunched the numbers many times.

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