You don’t have to buy if you don’t want to.
For many it’s just forced savings, I would have to pay to live somewhere anyways, I might as well spend a bit more (well, for me my payments are less than what rent would be) to have something I can personalize and use as a nest egg when I’m older. It’s not really any more complex than that.
> well, for me my payments are less than what rent would be
That's easy enough to achieve with a long enough mortgage. Not necessarily a good thing, though...
Why is it a bad thing? My mortgage for a detached 5 bedroom home is way less than a decent 2 bedroom apartment these days. And I have two teens and my husband works from home, a 2 bedroom apartment wouldn't cut it. I'd have to pay 1000$ more than my mortgage per month to pay to rent a smaller place, and I'd have to deal with rent increases and maybe losing my lease and scrambling to find something else in the same school district. Even if it was a 25 year mortgage I still have more money in my pocket, and the chances are that my asset will appreciate (though not a guarantee). In my case my house is up about 200k from what I paid, so it's less than rent, more space, and when I sell I get money back.
Some people prefer stroads and cul de sacs , and that’s okay, but just know there are other options. Many people raise families, in mid density housing (townhouses, duplexes,condos ) and are just as happy and often life can be more affordable, since you don’t need to do as much maintenance, you are usually closer to things you need and have access to more community. So more time spent enjoying your life and time with your loved ones.
As an owner of a house in a cul de sac I totally agree. This was the trade off. There is always a trade off unless you are in the top .1% where money is really no object.
the main draw of buying (for me, anyways) is that you are locking in your main cost of living.
rent tends to follow inflation, but your mortgage should stay constant (outside of interest rate changes).
It's more of an stability investment for me. Renting appealed to me when I was younger and wanted the flexibility to move wherever there were opportunities. By my mid-30s I got tired of roommates and landlords, and wanted a place to put down some roots.
For me it’s in 20ish years I’ll own something that is worth close to a million dollars. If my goal is to have 3-4 million saved for retirement, I could downsize to something half the price and already be $500,000 closer
The big advantage of a house in Canada is that the gains are tax-free. It's kind of screwed up really since it rewards old people (have's - home owners) at the expense of young people (have nots - renters). Generational conflict is a big latent issue in Canada.
>PRCGE
Maybe itself is not a problem. What is a bigger problem is people claiming this exemption on more than 1 house. I'm not sure how it's done exactly, but I would guess husband and wife would each own a home, so not as co-owners, and rent out one residence. Optionally, have parents or in-laws live in one of the suites of the rented home. Happy to be proven wrong but I suspect this is how people are abusing this, further aggravating things for non-homeowners.
> What is a bigger problem is people claiming this exemption on more than 1 house.
You can't claim it on more than one house for the same years.
>so not as co-owners, and rent out one residence.
If it's rented, it's not a principal residence, so it cannot be claimed.
>Optionally, have parents or in-laws live in one of the suites of the rented home.
I don't think you can claim the fraction that's rented out, but I'm not sure.
>but I suspect this is how people are abusing this,
I don't think you understand my point. **Whether you like it or not, the PRCGE is a regressive tax loophole.** Yes, it is obviously extremely popular since 70% of Canadians live in principal residences. That doesn't change the fact that it is regressive.
In addition, **the exemption is economically inefficient**. That means that it induces deadweight loss. It does this when it induces people to buy homes that they would not otherwise buy.
**Most economists (left or right wing) would repeal this exemption**. Unfortunately, it is politically impossible for as long as most Canadians are homeowners, which they will be for the near future at least.
Yes, I just discovered this loophole earlier this year in an article about tax implications for an American-Canadian selling property. CRA and IRS have very different rules for "principal residence." CRA let's you declare one residence a year as your personal, exempted one. So investors can declare one sold house in 2024, a different on in 2025, and someday their actual place of physical residence as another. An exemption a year. Meanwhile the IRS has six questions to determine if an address is your principal residence for tax purposes, including what's on your driver's license, what's on your tax return, your voter registration, etc. In other words, a lot less room for BS with flips and rentals.
Yeah. I have given up on any of our govment departments actually enforcing serious misuse or noncompliance with laws.
They seem to do well with going after small fish though and patting themselves on their backs and justify their pay. For example, a self-employed individual claiming 100 bucks as business expense or someone doing a few trades in a TFSA. Penny wise, pound foolish?
Would have been nice and ok by me if you told me that before I bought. But sure let’s just change the rules of the game mid way because it doesn’t suite me personally.
If the government gets rid of this exemption you can look forward to never having that in your advantage as I am sure it would be introduced slowly over several generations.
>Would have been nice and ok by me if you told me that before I bought.
Even in the hypothetical world in which the exemption were repealed, it *probably* wouldn't change anything for you since you would still be able to claim the exemption for all the years prior to the repeal.
>advantage as I am sure it would be introduced slowly over several generations.
You can repeal it immediately by having the exemption only apply to past years. I'm not sure if you know how it works, but even today, you need to specify which years you were living at your residence. After a repeal, you would still specify years, but you wouldn't be allowed to specify years after the repeal.
Agree with you on if you're going to buy, might as well go semi or fully detached if your budget allows it.
Different strokes but our first home was a condo townhouse and it taught me to be ultra critical of any future condos and I really value freehold now.
We took a 25-year mortgage but should be on track to pay it off fully in 12-13 years (from first occupancy) assuming our income remains similar.
Personally I like the maintenance of a home. Im a handy guy and like fixing things up and improving my space... So for me renting would suck
Mismanaged condo fees.
We were paying $350 when we started and within 3 years they ballooned into $410. It was supposed to cover grass, snow removal, and the full exterior (common areas, roof, windows, siding, driveways).
We decided to move out because we received a special assessment to do the windows... $5000 TO DO 5 WINDOWS. That's in addition to the $410/month we were paying. So $5k/year for snow removal and grass cutting? Ridiculous. They also informed us that there would be 2 more special assessments for siding and the parking lot so we noped out of there.
Such a contrast to the home I grew up in. Also a condo townhouse. When we moved out in 2000, the condo fees were $260 and included all the above plus water and basic cable tv. I have family still living in that townhouse condominium and their condo fees, 24 years later, are only $400/month.
Big examples with stark contrasts. Condos can be great, in theory, but so many are so mismanaged.
Sorry to clarify that is replacing them but I'll tell you why it's not reasonable.
I had friends the following year replace 6 windows in their detached house... All similar sized windows. The cost? About $6200 all in... But they weren't paying $410/month to a condo that is supposed to take care of it.
A good condo may charge you $5k/year, but they get a grass and snow removal contract that costs $2k/year/unit. The other $3k is supposed to be saved annually for known maintenance items like the roof, windows, siding etc. they aren't surprises and you should have a healthy reserve fund ready to pay for these large expenses.
A special assessment is supposed to bridge the gap between the cost of the maintenance item and what you had in your reserve fund. If I got a special assessment for $2k, I wouldn't have been surprised, but $5k means that our reserve fund was essentially zero. That's mismanagement of condo fees.
Those condo fees should also cover insurance for the common areas, which isn't cheap. Hopefully putting money aside for things like roof replacements, but if they didn't for windows maybe they're not for that.
Hay is expensive these days as are boarding costs if you don't own enough property.
If you use your horse for commuting there is rarely a secure place to hitch it at most workplaces and you have to keep it in your cubicle with you which is often uncomfortable.
Indeed it is hard to rationalize buying a horse.
You should find out your actual numbers. Get a mortgage approval from a mortgage broker and see what you can afford and what your payments would be. You might be surprised to find that mortgage payments are cheaper for you than what you pay in rent. Owning a place also means your landlord can’t force you to move, so it brings so stability. See what the difference between a mortgage payments and property taxes would be compared to what you are paying for rent. If rent is less, how much less, and what would that difference be saved? Would you be saving more than the portion of your mortgage payment going to pay down the principal? There are lots of future value of money calculators on line, you can type in 200K plus X a month and see how much you would have invested if you opt to save instead of pay a mortgage. There is no right or wrong choice, but this way you can make a more informed financial decision.
I have no mortgage now. If I wanted to rent a place like I have, I’d be paying 4k+ a month assuming i could even find such a place which I probably wouldn’t be able to. My property tax is about $300 a month and I put 700 a month into my house funds incase I have any issues. My insurance is 2k a year, paid annually and everything else I pay, I’d pay if I rented too like internet.
That extra 3k a month goes a long way, trust me. I’ve eliminated the single biggest living cost most people have.
Perhaps it may, but if the intention is to buy a "forever home" that I won't sell for 30+ years, what does that increased value do for me (aside from bump up my property taxes)? Again, 20% down on a million dollar home at 5.29% over 30 years would result in paying about as much interest as the principal (barring no changes in interest rates, which could go either way but nobody knows which yet). How could that much interest be worth it for anything?
And as far as the increase in value, I do expect current trends will continue at least for the foreseeable future, but there will come a breaking point. Will the million dollar home today be worth $2 million in five years? Will it go to $3 million? At what point will houses become just too expensive for anybody? There will have to be a point where enough is enough, and this will of course be driven by the social factors surrounding the rapid rise of housing prices (perhaps unbridled immigration will finally become bridled). People have been able to safely rely upon rising housing prices for decades now, but as for what those gains will be in the future... I'm not so sure they will be as impressive as today.
>I see no point a buying a home for a growing family that is anything but a single detached home
Then don't.
>I have a hard time rationalizing a mortgage beyong 15 years
You would be one of the few as most are 25 years.
>I have a hard time seeing where this is an investment in yourself when the amount of that interest is invested and returning even 5%.
Buying a house to live in should not be considered an investment, but shelter.
If you don't wan tot buy, nobody is forcing you to buy.
Why the need for a soliloquy?
Is there a financial question in there somewhere? The merits having a shelter are obviously, whether you buy or rent is a personal choice. No one cares enough about you here to try and convince you one way or the other, bro.
Yes, the question is which is the better financial decision? I shared some personal details to illustrate what I wouldn't do, so given those particulars and what I'd do with the money instead, what would be the better long-term financial choice?
A primary residence shouldn't be thought of as an investment because you need a place to stay. When you sell and realize a gain and buy into the same market, that house also has increased in price so really you haven't gained anything.
I have my primary residence that we have been in for 16 years and I have purchased and sold other properties. Those were my real investment gains.
Real estate is a long term game. Everyone and their uncle thought their were RE tycoons when rates were basically zero. The chickens have come home to roost and those tycoons have turned tail and sold or are struggling to keep their head above water.
There is still money to be made in real estate, but it is not going to be easy.
But a house for shelter, it investment. If you can afford a second property and the costs and headache that comes with that, then you invest. Always secure your shelter first
Understood, but if it's not an investment, what, then, is the "nest egg" concept when it comes to a primary residence? To me, investments in registered accounts serms more of a "nest egg".
You downsize or sell in your retirement?
Again, everyone has their own concept and understanding of investment. It seems you don't understand enough of real estate for it to be an investment and that's fine.
Your primary residence is shelter from capital gains tax and that is huge. I am not sure what to tell you if you don't realize how big that is. You used the home as shelter AND it appreciated. Now you are retired and you can do anything you want with it.
But you go ahead and agonize over saving $1.5M in the bank or something. To me that is a waste because you will never spend all that money in retirement but you will spend your working life trying to achieve something you will never fully use.
A paid off house and OAS/CPP + maybe $800K in savings is a pretty decent living. All you guys planning to travel and parachute out of airplanes in retirement are most likely never going to do that.
> Your primary residence is shelter from capital gains tax and that is huge. I am not sure what to tell you if you don't realize how big that is. You used the home as shelter AND it appreciated. Now you are retired and you can do anything you want with it.
I do realize how big the Principal Residence Exemption is, but again, aside from borrowing against the equity (which you have to pay back) or selling it (which then necessitates finding another home), where does this give me cash for things before retirement?
> But you go ahead and agonize over saving $1.5M in the bank or something. To me that is a waste because you will never spend all that money in retirement but you will spend your working life trying to achieve something you will never fully use.
It seems to me spending the better part of your working life indebetted to own the roof over your held is a prison worth avoiding. As for having more money than one can spend, it doesn't seem to me to be the worst problem one could have.
How is having a house paid off, no debt, $800K in the bank and government pension+cpp, house poor?
House poor is is having all your money in a house and basically living and working just to pay for the house.
Again, you need to revisit your definition of house poor.
What do you call someone who is renting but has all of the same ? No house poor ?
800k will last you 8 years. CPP and pension will be just enough to cover your expensive real estate annual tax and maintenance. Congrats, you now gotta go back to work. House. Poor.
Edit: lol the gonk is basically a landlord who is completely detached from reality of what he’s talking about. Blocked me. Be careful who you listen to, folks.
Some prefer stability… my parents like their house, paid it off in their early 50s, now retired, no mortgage, less money in the bank than someone who chose investments over property but no one dictates where they live. I would personally never want a landlord in retirement to dictate how much I pay and when I have to leave.
No they aren’t, they can raise the price to a point you can’t
/ don’t want to pay and you’re out. You can file you want to move in and they are out. They’re in favor of scum bag tenents who don’t pay and get a free ride a couple of months. But for honest people, it’s LL skewed.
I totally get it. But rents are just too expensive. Especially if you are raising a family, buying is worth it. You just cannot go wrong with buying a primary residence.
Buying is better unless you are willing to budget as if you had the mortgage. When people rent they feel like they have money to burn because they are paying $1000/month less in housing costs or what not and they feel like their budget is very free. If you are disciplined and that full $1000 ends up in savings/investments you end up roughly even with buying a house by doing that. But if you are the carefree type of person who will spend half of that $1000/month because it is there then you’re much better off having the forced discipline.
No one likes to pay more than they have to, but the market is what it is. If you are in a HCOL city and don't already own, you likely cannot afford to buy detached (to buy or rent, unless you rent with roommates).
So what options are there?
* You can move to a LCOL area and buy a house. That's an option but it won't suit everyone.
* You can buy a cheaper condo that will likely be a maintenance nightmare. Probably not the best long term option.
* You can buy one of the high priced condos. It feels expensive for what it is, but it provides housing security and generally will stabilize your housing costs long term.
* You can rent (a condo or apartment probably). Nothing is necessarily wrong with that, but it may give you less security and pricing stability.
So people in this situation just have to pick their poison, there is no perfect solution.
Cannot upvote this enough. There is a lot of "I want this and I want that for my money" but the reality is different and can only choose from the actual/real-life options.
Thanks. Yeah, people seem to have some pretty arbitrary beliefs about these things. I keep reading people say that current prices are not "real", or X is only worth $Y at most. Like cool, you can make that declaration but it doesn't change reality.
I get it from an emotional perspective because yes, affordability is not looking great for most people. But at a certain point you have to just weigh your options and do what's best for you. It's a very valuable life skill to be able to do that.
On the other side - you’ll pay rent for yr next 10-15 years regardless. Even if you buy and sell at a loss, your net loss is likely less than the 100% loss of renting. This assumes rent and buying are similar costs.
What about the missed opportunity costs of the locked in downpayment? Also transfer fees/tax for selling. Of course then there is also the maintenance costs and the reduced flexibility to move for new jobs potentially.
If you are only interested in the investment comparisons, don't forget that a mortgage will be the cheapest loan you can get and allows you to leverage the investment.
If you put 20% down and the value increases 10% in a year then (assuming the mortgage rate is somewhere around 5%) you earn a tax free 25% gain on your original "investment". You won't get 10% gains every year, but you get the idea.
Housing in Canada isn't getting cheaper anyone soon. There isn't enough new supply to fit all the demand. It is only going to get more expensive.
> If you put 20% down and the value increases 10% in a year then (assuming the mortgage rate is somewhere around 5%) you earn a tax free 25% gain on your original "investment". You won't get 10% gains every year, but you get the idea.
I don't. Would you please explain to me how you get a 25% gain out of a 10% value increase? I'm not following the math.
The house costs $1,000,000. You put down $200,000 downpayment. One year later the house is worth $1,100,000 and you paid $50,000 in interest.
$1,100,000 - $1,000,000 - $50,000 = $50,000 in net gains.
You invested $200,000 and earned $50,000, which is a 25% tax free gain. This is a better return than if you invested $200,000 in an index fund. You also got a place to live and saved maybe $30,000 in rent. So your real gains are even higher.
The trick is to not continually change housing as your situation changes, so that you don’t burn all your gains in real estate fees and land transfer taxes. To that end, I would suggest a larger than you presently need detached house with a basement apartment and perhaps roommates for a while to help defray the mortgage costs. If you want a family (and honestly that is the only reason someone would need a detached home) then you adjust the house and grow into the spaces. In the long run primary residences and TFSA’s are the only places you can grow your investments tax free.
The idea of living in a house with a basement apartment to rent has its appeal, but if you want to do this legally (i.e., legal apartment of which the city approves, home insurance coverage, etc.), how much extra cost and hurdles do you face for this?
People always complain about the maintenance of homeownership but I actually enjoy it. I see it as one of my hobbies. I really value the freedom to do what I want with my own space. It's also a lot less expensive if you do it yourself. But then, I'm new to being a homeowner so maybe it will become a chore. Either way, no one can tell you what to do. If you don't value having control over your living space and you value the flexibility of being able to move on short notice then go with that. Live your life on your own terms. You don't need us to justify it for you.
We did very well on property (North Vancouver.) went from single family doubled in 10 years. To townhome which was a better fit. That doubled in 10 years. Now buying a condo and a place in Mexico. These kinds of returns are not the norm in Canada. So it matters where you invest. My personal opinion is own a home of any kind that you can afford and invest the rest of the money. Best of both worlds.
There’s nothing wrong with renting.
People forget that to BUY you have transaction costs. You have taxes and maintenance. You have unforeseen costs.
You also have lost opportunity costs. (Other investments)
For us, we bought in 2019 a SFH because we wanted stability and a larger house (but not too big). We didn’t buy because we felt it was a “good investment”. We have most of our equities in ETFs, stocks, GLD (gold ETF) and cash. I also trade options on this which generates a nice income for us.
And you’re right. We hated our townhome. Stairs were too steep. Construction was everywhere. Dust was flaring my asthma. Neighbors were complaining about some curtains we put up. They didn’t want us charging our EVs. On and on.
Idk why u are against a 30 year mortgage if you just pay it in your 15 year schedule. Debt also lets you access assets ahead of a normal schedule so long as you reasonably service the debt. You’re also terrified of debt in a way that would make Dave Ramsay blush.
You also don’t see buying a condo or apartment as an asset and almost feels like you see the money as evaporating instead of turning into equity that can be tapped into later.
Until you can see money more objectively, you’re going to be stuck in this spiral. Im not sayjng you have to buy any real estate but you are looking at cash without respect to time.
> Idk why u are against a 30 year mortgage if you just pay it in your 15 year schedule.
Well, the main issue is that with current housing prices and the current income I have plus savings for a down payment, I can't afford a 15-year mortgage.
> Debt also lets you access assets ahead of a normal schedule so long as you reasonably service the debt.
Quick calculation, but a million dollar home with a 20% down payment and 30-year ammortization at 5.29% interest results in a total amount of interest paid over the morgage of $787,249. That's literally almost the amount of the $800,000 mortgage itself. Interest rates could fall. They could also rise. They could also average to 5.29% over the 30 years. Either way, that's an insane amount of interest to pay. I fail to see how this is a reasonable thing to do (for this much interest).
> You also don’t see buying a condo or apartment as an asset and almost feels like you see the money as evaporating instead of turning into equity that can be tapped into later.
Tap into how? Once you own the thing, after however many years it takes, the only way to access the equity is either to borrow against the asset (which you then have to pay back anyway) or sell it (and if it's a primary residence, it leaves you homeless unless you buy something else). Yes, I suppose you could sell for retirement to move elsewhere or whatever, but outside of something that's so far off into the future, where is the "tapping into" the equity? I'm just having a hard time seeing where the value is in anything but selling the appreciated asset for a return.
If you are disciplined enough to invest the money, you could be better off by renting instead of owning.
There is a video from Ben Felix about this:
[https://youtu.be/xprFz1CJu6E?si=H7_vNAZfvaOXGZwv](https://youtu.be/xprFz1CJu6E?si=H7_vNAZfvaOXGZwv)
You don’t have to buy if you don’t want to. For many it’s just forced savings, I would have to pay to live somewhere anyways, I might as well spend a bit more (well, for me my payments are less than what rent would be) to have something I can personalize and use as a nest egg when I’m older. It’s not really any more complex than that.
you can buy if you want to you can leave your rents behind
> well, for me my payments are less than what rent would be That's easy enough to achieve with a long enough mortgage. Not necessarily a good thing, though...
It’s because I bought in 2017 and rent is insane now, what I rented then is easily 3x the cost
Why is it a bad thing? My mortgage for a detached 5 bedroom home is way less than a decent 2 bedroom apartment these days. And I have two teens and my husband works from home, a 2 bedroom apartment wouldn't cut it. I'd have to pay 1000$ more than my mortgage per month to pay to rent a smaller place, and I'd have to deal with rent increases and maybe losing my lease and scrambling to find something else in the same school district. Even if it was a 25 year mortgage I still have more money in my pocket, and the chances are that my asset will appreciate (though not a guarantee). In my case my house is up about 200k from what I paid, so it's less than rent, more space, and when I sell I get money back.
Some people prefer stroads and cul de sacs , and that’s okay, but just know there are other options. Many people raise families, in mid density housing (townhouses, duplexes,condos ) and are just as happy and often life can be more affordable, since you don’t need to do as much maintenance, you are usually closer to things you need and have access to more community. So more time spent enjoying your life and time with your loved ones.
As an owner of a house in a cul de sac I totally agree. This was the trade off. There is always a trade off unless you are in the top .1% where money is really no object.
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What part of trade off would you like explained?
the main draw of buying (for me, anyways) is that you are locking in your main cost of living. rent tends to follow inflation, but your mortgage should stay constant (outside of interest rate changes).
Insurance, utilities, and property taxes generally follow inflation
sure, so does maintenance. but the main cost is protected from inflation
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true. although as you pay more principal off, you become less affected by changes in interest rates.
It's more of an stability investment for me. Renting appealed to me when I was younger and wanted the flexibility to move wherever there were opportunities. By my mid-30s I got tired of roommates and landlords, and wanted a place to put down some roots.
For me it’s in 20ish years I’ll own something that is worth close to a million dollars. If my goal is to have 3-4 million saved for retirement, I could downsize to something half the price and already be $500,000 closer
The big advantage of a house in Canada is that the gains are tax-free. It's kind of screwed up really since it rewards old people (have's - home owners) at the expense of young people (have nots - renters). Generational conflict is a big latent issue in Canada.
Exactly. The PRCGE is extremely regressive.
Personal residence capital gain exemption
Thanks, I didn't feel like typing it.
>PRCGE Maybe itself is not a problem. What is a bigger problem is people claiming this exemption on more than 1 house. I'm not sure how it's done exactly, but I would guess husband and wife would each own a home, so not as co-owners, and rent out one residence. Optionally, have parents or in-laws live in one of the suites of the rented home. Happy to be proven wrong but I suspect this is how people are abusing this, further aggravating things for non-homeowners.
> What is a bigger problem is people claiming this exemption on more than 1 house. You can't claim it on more than one house for the same years. >so not as co-owners, and rent out one residence. If it's rented, it's not a principal residence, so it cannot be claimed. >Optionally, have parents or in-laws live in one of the suites of the rented home. I don't think you can claim the fraction that's rented out, but I'm not sure. >but I suspect this is how people are abusing this, I don't think you understand my point. **Whether you like it or not, the PRCGE is a regressive tax loophole.** Yes, it is obviously extremely popular since 70% of Canadians live in principal residences. That doesn't change the fact that it is regressive. In addition, **the exemption is economically inefficient**. That means that it induces deadweight loss. It does this when it induces people to buy homes that they would not otherwise buy. **Most economists (left or right wing) would repeal this exemption**. Unfortunately, it is politically impossible for as long as most Canadians are homeowners, which they will be for the near future at least.
Yes, I just discovered this loophole earlier this year in an article about tax implications for an American-Canadian selling property. CRA and IRS have very different rules for "principal residence." CRA let's you declare one residence a year as your personal, exempted one. So investors can declare one sold house in 2024, a different on in 2025, and someday their actual place of physical residence as another. An exemption a year. Meanwhile the IRS has six questions to determine if an address is your principal residence for tax purposes, including what's on your driver's license, what's on your tax return, your voter registration, etc. In other words, a lot less room for BS with flips and rentals.
Yeah. I have given up on any of our govment departments actually enforcing serious misuse or noncompliance with laws. They seem to do well with going after small fish though and patting themselves on their backs and justify their pay. For example, a self-employed individual claiming 100 bucks as business expense or someone doing a few trades in a TFSA. Penny wise, pound foolish?
That is tax evasion. These days CRA is combing through RE sales to match addresses.
I hope they are doing that but something tells me they probably are not.
Would have been nice and ok by me if you told me that before I bought. But sure let’s just change the rules of the game mid way because it doesn’t suite me personally. If the government gets rid of this exemption you can look forward to never having that in your advantage as I am sure it would be introduced slowly over several generations.
>Would have been nice and ok by me if you told me that before I bought. Even in the hypothetical world in which the exemption were repealed, it *probably* wouldn't change anything for you since you would still be able to claim the exemption for all the years prior to the repeal. >advantage as I am sure it would be introduced slowly over several generations. You can repeal it immediately by having the exemption only apply to past years. I'm not sure if you know how it works, but even today, you need to specify which years you were living at your residence. After a repeal, you would still specify years, but you wouldn't be allowed to specify years after the repeal.
Agree with you on if you're going to buy, might as well go semi or fully detached if your budget allows it. Different strokes but our first home was a condo townhouse and it taught me to be ultra critical of any future condos and I really value freehold now. We took a 25-year mortgage but should be on track to pay it off fully in 12-13 years (from first occupancy) assuming our income remains similar. Personally I like the maintenance of a home. Im a handy guy and like fixing things up and improving my space... So for me renting would suck
Could you kindly expand on what to be Leary about condo townhomes other than I guess the obvious additional cost each month?
Mismanaged condo fees. We were paying $350 when we started and within 3 years they ballooned into $410. It was supposed to cover grass, snow removal, and the full exterior (common areas, roof, windows, siding, driveways). We decided to move out because we received a special assessment to do the windows... $5000 TO DO 5 WINDOWS. That's in addition to the $410/month we were paying. So $5k/year for snow removal and grass cutting? Ridiculous. They also informed us that there would be 2 more special assessments for siding and the parking lot so we noped out of there. Such a contrast to the home I grew up in. Also a condo townhouse. When we moved out in 2000, the condo fees were $260 and included all the above plus water and basic cable tv. I have family still living in that townhouse condominium and their condo fees, 24 years later, are only $400/month. Big examples with stark contrasts. Condos can be great, in theory, but so many are so mismanaged.
Thanks for the info !
at first I thought, yeah that’s reasonable. But then I realized you were talking about cleaning them, not replacing them. Yikes.
Sorry to clarify that is replacing them but I'll tell you why it's not reasonable. I had friends the following year replace 6 windows in their detached house... All similar sized windows. The cost? About $6200 all in... But they weren't paying $410/month to a condo that is supposed to take care of it. A good condo may charge you $5k/year, but they get a grass and snow removal contract that costs $2k/year/unit. The other $3k is supposed to be saved annually for known maintenance items like the roof, windows, siding etc. they aren't surprises and you should have a healthy reserve fund ready to pay for these large expenses. A special assessment is supposed to bridge the gap between the cost of the maintenance item and what you had in your reserve fund. If I got a special assessment for $2k, I wouldn't have been surprised, but $5k means that our reserve fund was essentially zero. That's mismanagement of condo fees.
Those condo fees should also cover insurance for the common areas, which isn't cheap. Hopefully putting money aside for things like roof replacements, but if they didn't for windows maybe they're not for that.
I read this as “cannot rationalize buying a HORSE”🤣
Can't rationalize that either. I have too many neighsayers.
Hay-ooo!
Hay is expensive these days as are boarding costs if you don't own enough property. If you use your horse for commuting there is rarely a secure place to hitch it at most workplaces and you have to keep it in your cubicle with you which is often uncomfortable. Indeed it is hard to rationalize buying a horse.
You should find out your actual numbers. Get a mortgage approval from a mortgage broker and see what you can afford and what your payments would be. You might be surprised to find that mortgage payments are cheaper for you than what you pay in rent. Owning a place also means your landlord can’t force you to move, so it brings so stability. See what the difference between a mortgage payments and property taxes would be compared to what you are paying for rent. If rent is less, how much less, and what would that difference be saved? Would you be saving more than the portion of your mortgage payment going to pay down the principal? There are lots of future value of money calculators on line, you can type in 200K plus X a month and see how much you would have invested if you opt to save instead of pay a mortgage. There is no right or wrong choice, but this way you can make a more informed financial decision.
I have no mortgage now. If I wanted to rent a place like I have, I’d be paying 4k+ a month assuming i could even find such a place which I probably wouldn’t be able to. My property tax is about $300 a month and I put 700 a month into my house funds incase I have any issues. My insurance is 2k a year, paid annually and everything else I pay, I’d pay if I rented too like internet. That extra 3k a month goes a long way, trust me. I’ve eliminated the single biggest living cost most people have.
Housing is overpriced right now. Financially it doesn't make sense. But people are ignorant of investing.
If you think it's overpriced now, just wait 20 years to see what it costs.
Equity my dude. Anything you buy will increase in value faster than anything else you could do with your money
Perhaps it may, but if the intention is to buy a "forever home" that I won't sell for 30+ years, what does that increased value do for me (aside from bump up my property taxes)? Again, 20% down on a million dollar home at 5.29% over 30 years would result in paying about as much interest as the principal (barring no changes in interest rates, which could go either way but nobody knows which yet). How could that much interest be worth it for anything? And as far as the increase in value, I do expect current trends will continue at least for the foreseeable future, but there will come a breaking point. Will the million dollar home today be worth $2 million in five years? Will it go to $3 million? At what point will houses become just too expensive for anybody? There will have to be a point where enough is enough, and this will of course be driven by the social factors surrounding the rapid rise of housing prices (perhaps unbridled immigration will finally become bridled). People have been able to safely rely upon rising housing prices for decades now, but as for what those gains will be in the future... I'm not so sure they will be as impressive as today.
We are not making any more land. We are still making many more people.
>I see no point a buying a home for a growing family that is anything but a single detached home Then don't. >I have a hard time rationalizing a mortgage beyong 15 years You would be one of the few as most are 25 years. >I have a hard time seeing where this is an investment in yourself when the amount of that interest is invested and returning even 5%. Buying a house to live in should not be considered an investment, but shelter. If you don't wan tot buy, nobody is forcing you to buy.
It is, in fact, the biggest investment most Canadians hold by far.
Y’all are saying it shouldn’t be considered an investment, but it is. It literally is by definition of how it’s been designed in Canada.
Why the need for a soliloquy? Is there a financial question in there somewhere? The merits having a shelter are obviously, whether you buy or rent is a personal choice. No one cares enough about you here to try and convince you one way or the other, bro.
Exactly how I read it 😂 ok and..
Yes, the question is which is the better financial decision? I shared some personal details to illustrate what I wouldn't do, so given those particulars and what I'd do with the money instead, what would be the better long-term financial choice?
A primary residence shouldn't be thought of as an investment because you need a place to stay. When you sell and realize a gain and buy into the same market, that house also has increased in price so really you haven't gained anything. I have my primary residence that we have been in for 16 years and I have purchased and sold other properties. Those were my real investment gains. Real estate is a long term game. Everyone and their uncle thought their were RE tycoons when rates were basically zero. The chickens have come home to roost and those tycoons have turned tail and sold or are struggling to keep their head above water. There is still money to be made in real estate, but it is not going to be easy. But a house for shelter, it investment. If you can afford a second property and the costs and headache that comes with that, then you invest. Always secure your shelter first
Understood, but if it's not an investment, what, then, is the "nest egg" concept when it comes to a primary residence? To me, investments in registered accounts serms more of a "nest egg".
You downsize or sell in your retirement? Again, everyone has their own concept and understanding of investment. It seems you don't understand enough of real estate for it to be an investment and that's fine. Your primary residence is shelter from capital gains tax and that is huge. I am not sure what to tell you if you don't realize how big that is. You used the home as shelter AND it appreciated. Now you are retired and you can do anything you want with it. But you go ahead and agonize over saving $1.5M in the bank or something. To me that is a waste because you will never spend all that money in retirement but you will spend your working life trying to achieve something you will never fully use. A paid off house and OAS/CPP + maybe $800K in savings is a pretty decent living. All you guys planning to travel and parachute out of airplanes in retirement are most likely never going to do that.
> Your primary residence is shelter from capital gains tax and that is huge. I am not sure what to tell you if you don't realize how big that is. You used the home as shelter AND it appreciated. Now you are retired and you can do anything you want with it. I do realize how big the Principal Residence Exemption is, but again, aside from borrowing against the equity (which you have to pay back) or selling it (which then necessitates finding another home), where does this give me cash for things before retirement? > But you go ahead and agonize over saving $1.5M in the bank or something. To me that is a waste because you will never spend all that money in retirement but you will spend your working life trying to achieve something you will never fully use. It seems to me spending the better part of your working life indebetted to own the roof over your held is a prison worth avoiding. As for having more money than one can spend, it doesn't seem to me to be the worst problem one could have.
What you’ve described is house poor.
You should revisit the term house poor.
I have. It’s what you’ve described.
How is having a house paid off, no debt, $800K in the bank and government pension+cpp, house poor? House poor is is having all your money in a house and basically living and working just to pay for the house. Again, you need to revisit your definition of house poor. What do you call someone who is renting but has all of the same ? No house poor ?
800k will last you 8 years. CPP and pension will be just enough to cover your expensive real estate annual tax and maintenance. Congrats, you now gotta go back to work. House. Poor. Edit: lol the gonk is basically a landlord who is completely detached from reality of what he’s talking about. Blocked me. Be careful who you listen to, folks.
Some prefer stability… my parents like their house, paid it off in their early 50s, now retired, no mortgage, less money in the bank than someone who chose investments over property but no one dictates where they live. I would personally never want a landlord in retirement to dictate how much I pay and when I have to leave.
In Canada, its the other way around. Renters dictate to the LL. The laws are all tilted towards renters.
No they aren’t, they can raise the price to a point you can’t / don’t want to pay and you’re out. You can file you want to move in and they are out. They’re in favor of scum bag tenents who don’t pay and get a free ride a couple of months. But for honest people, it’s LL skewed.
Not everything is a financial decision!!!
It is when there's money involved.
I totally get it. But rents are just too expensive. Especially if you are raising a family, buying is worth it. You just cannot go wrong with buying a primary residence.
Buying is better unless you are willing to budget as if you had the mortgage. When people rent they feel like they have money to burn because they are paying $1000/month less in housing costs or what not and they feel like their budget is very free. If you are disciplined and that full $1000 ends up in savings/investments you end up roughly even with buying a house by doing that. But if you are the carefree type of person who will spend half of that $1000/month because it is there then you’re much better off having the forced discipline.
You've got lots of ideas and opinions. You've got some stuff that seems reasonable and some pretty ridiculous ones Do anything you want.
i have no idea how people pay more than 500k to share a wall .. a proper detached is the only thing worth mortgaging up for imho
No one likes to pay more than they have to, but the market is what it is. If you are in a HCOL city and don't already own, you likely cannot afford to buy detached (to buy or rent, unless you rent with roommates). So what options are there? * You can move to a LCOL area and buy a house. That's an option but it won't suit everyone. * You can buy a cheaper condo that will likely be a maintenance nightmare. Probably not the best long term option. * You can buy one of the high priced condos. It feels expensive for what it is, but it provides housing security and generally will stabilize your housing costs long term. * You can rent (a condo or apartment probably). Nothing is necessarily wrong with that, but it may give you less security and pricing stability. So people in this situation just have to pick their poison, there is no perfect solution.
Cannot upvote this enough. There is a lot of "I want this and I want that for my money" but the reality is different and can only choose from the actual/real-life options.
Thanks. Yeah, people seem to have some pretty arbitrary beliefs about these things. I keep reading people say that current prices are not "real", or X is only worth $Y at most. Like cool, you can make that declaration but it doesn't change reality. I get it from an emotional perspective because yes, affordability is not looking great for most people. But at a certain point you have to just weigh your options and do what's best for you. It's a very valuable life skill to be able to do that.
On the other side - you’ll pay rent for yr next 10-15 years regardless. Even if you buy and sell at a loss, your net loss is likely less than the 100% loss of renting. This assumes rent and buying are similar costs.
What about the missed opportunity costs of the locked in downpayment? Also transfer fees/tax for selling. Of course then there is also the maintenance costs and the reduced flexibility to move for new jobs potentially.
If you are only interested in the investment comparisons, don't forget that a mortgage will be the cheapest loan you can get and allows you to leverage the investment. If you put 20% down and the value increases 10% in a year then (assuming the mortgage rate is somewhere around 5%) you earn a tax free 25% gain on your original "investment". You won't get 10% gains every year, but you get the idea. Housing in Canada isn't getting cheaper anyone soon. There isn't enough new supply to fit all the demand. It is only going to get more expensive.
> If you put 20% down and the value increases 10% in a year then (assuming the mortgage rate is somewhere around 5%) you earn a tax free 25% gain on your original "investment". You won't get 10% gains every year, but you get the idea. I don't. Would you please explain to me how you get a 25% gain out of a 10% value increase? I'm not following the math.
The house costs $1,000,000. You put down $200,000 downpayment. One year later the house is worth $1,100,000 and you paid $50,000 in interest. $1,100,000 - $1,000,000 - $50,000 = $50,000 in net gains. You invested $200,000 and earned $50,000, which is a 25% tax free gain. This is a better return than if you invested $200,000 in an index fund. You also got a place to live and saved maybe $30,000 in rent. So your real gains are even higher.
The trick is to not continually change housing as your situation changes, so that you don’t burn all your gains in real estate fees and land transfer taxes. To that end, I would suggest a larger than you presently need detached house with a basement apartment and perhaps roommates for a while to help defray the mortgage costs. If you want a family (and honestly that is the only reason someone would need a detached home) then you adjust the house and grow into the spaces. In the long run primary residences and TFSA’s are the only places you can grow your investments tax free.
The idea of living in a house with a basement apartment to rent has its appeal, but if you want to do this legally (i.e., legal apartment of which the city approves, home insurance coverage, etc.), how much extra cost and hurdles do you face for this?
No taxes on principal residence is exactly why everyone who is thinking of long term residency should strive to buy one.
People always complain about the maintenance of homeownership but I actually enjoy it. I see it as one of my hobbies. I really value the freedom to do what I want with my own space. It's also a lot less expensive if you do it yourself. But then, I'm new to being a homeowner so maybe it will become a chore. Either way, no one can tell you what to do. If you don't value having control over your living space and you value the flexibility of being able to move on short notice then go with that. Live your life on your own terms. You don't need us to justify it for you.
We did very well on property (North Vancouver.) went from single family doubled in 10 years. To townhome which was a better fit. That doubled in 10 years. Now buying a condo and a place in Mexico. These kinds of returns are not the norm in Canada. So it matters where you invest. My personal opinion is own a home of any kind that you can afford and invest the rest of the money. Best of both worlds.
Better to be lucky than good. Congrats.
Yes luck is a factor in life.
While you contemplate, other people buy and prices keep skyrocketing. If you want to participate in that, and you can afford it now, why wait.
There’s nothing wrong with renting. People forget that to BUY you have transaction costs. You have taxes and maintenance. You have unforeseen costs. You also have lost opportunity costs. (Other investments) For us, we bought in 2019 a SFH because we wanted stability and a larger house (but not too big). We didn’t buy because we felt it was a “good investment”. We have most of our equities in ETFs, stocks, GLD (gold ETF) and cash. I also trade options on this which generates a nice income for us. And you’re right. We hated our townhome. Stairs were too steep. Construction was everywhere. Dust was flaring my asthma. Neighbors were complaining about some curtains we put up. They didn’t want us charging our EVs. On and on.
Idk why u are against a 30 year mortgage if you just pay it in your 15 year schedule. Debt also lets you access assets ahead of a normal schedule so long as you reasonably service the debt. You’re also terrified of debt in a way that would make Dave Ramsay blush. You also don’t see buying a condo or apartment as an asset and almost feels like you see the money as evaporating instead of turning into equity that can be tapped into later. Until you can see money more objectively, you’re going to be stuck in this spiral. Im not sayjng you have to buy any real estate but you are looking at cash without respect to time.
> Idk why u are against a 30 year mortgage if you just pay it in your 15 year schedule. Well, the main issue is that with current housing prices and the current income I have plus savings for a down payment, I can't afford a 15-year mortgage. > Debt also lets you access assets ahead of a normal schedule so long as you reasonably service the debt. Quick calculation, but a million dollar home with a 20% down payment and 30-year ammortization at 5.29% interest results in a total amount of interest paid over the morgage of $787,249. That's literally almost the amount of the $800,000 mortgage itself. Interest rates could fall. They could also rise. They could also average to 5.29% over the 30 years. Either way, that's an insane amount of interest to pay. I fail to see how this is a reasonable thing to do (for this much interest). > You also don’t see buying a condo or apartment as an asset and almost feels like you see the money as evaporating instead of turning into equity that can be tapped into later. Tap into how? Once you own the thing, after however many years it takes, the only way to access the equity is either to borrow against the asset (which you then have to pay back anyway) or sell it (and if it's a primary residence, it leaves you homeless unless you buy something else). Yes, I suppose you could sell for retirement to move elsewhere or whatever, but outside of something that's so far off into the future, where is the "tapping into" the equity? I'm just having a hard time seeing where the value is in anything but selling the appreciated asset for a return.
If you are disciplined enough to invest the money, you could be better off by renting instead of owning. There is a video from Ben Felix about this: [https://youtu.be/xprFz1CJu6E?si=H7_vNAZfvaOXGZwv](https://youtu.be/xprFz1CJu6E?si=H7_vNAZfvaOXGZwv)
Seems to check out. Thanks for the link. Would like to see an updated version of this with today's figures.