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Home ownership forces you to save like no other investment vehicle

What else is one to make of a country where about half of Canadians said they didn’t make a contribution to a registered retirement savings plan this year but close to 70% of households now own their home.

“Your money grows tax free,” says Jason Heath, a fee-based certified financial planner with Objective Financial Partners Inc. “Even in your RRSP, there are forced withdrawals and it’s fully taxable [when taken out].”

The main advantage of home ownership is the forced savings it generates. The real estate industry has its tired lines like “you can’t live in your investment” or “you have to live somewhere” but it’s the discipline of payments a mortgage forces that makes it a decent investment for most Canadians.

For the rest of the story: Financial Post – Why cash rests in your home

You also can’t ignore the tax benefits that come from home ownership because of the exemption you get from any gains on your principal residence. Put in sweat equity by fixing your house to raise the value and that’s about the only legal way not to pay tax in this country.

Then there’s the leverage. Nobody will let you leverage any other investment with 95% debt to 5% equity. If you are borrowing money at 3% and your investment is going up 5% every year, you can’t lose.

Phil Soper, chief executive of Royal LePage Real Estate Services, said “In a typical price appreciating environment you get the leverage effect on borrowed money which works best when the interest costs are low which is what it is today.”

The divide has widened between renting and owning but he adds many families end up turning to buying because they can’t find what they are looking for in the rental market.

Source can be looked at for more information on this topic.

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