{"id":278,"date":"2015-07-12T20:24:45","date_gmt":"2015-07-12T20:24:45","guid":{"rendered":"http:\/\/www.chrisbrownrealestate.ca\/blog\/?p=278"},"modified":"2015-07-12T20:29:13","modified_gmt":"2015-07-12T20:29:13","slug":"financialpost-com-eternal-truth-of-personal-finance-no-4-dont-be-a-renter","status":"publish","type":"post","link":"https:\/\/www.chrisbrownrealestate.ca\/blog\/financialpost-com-eternal-truth-of-personal-finance-no-4-dont-be-a-renter\/","title":{"rendered":"Eternal truth of personal finance #4: Don\u2019t be a renter"},"content":{"rendered":"
\"Cates-Landing-New-Deep-Cove-North-Vancouver-Condos-and-Townhomes\"<\/a>

Cates Landing by Polygon Homes. Waterfront apartments and townhomes now selling in North Vancouver.<\/p><\/div>\n

Taken from:\u00a0http:\/\/business.financialpost.com\/personal-finance\/young-money\/eternal-truth-of-personal-finance-no-4-dont-be-a-renter<\/a><\/p>\n

No matter the business cycle or the trends, there are some things that never change when it comes to saving, building and managing money. Long-time Financial Post columnist Jonathan Chevreau presents the fourth instalment of the seven eternal truths of personal finance.<\/strong><\/p>\n

I\u2019ve always said a paid-for home is the foundation of financial independence. You have to live somewhere and you can\u2019t live in an RRSP. Most of us have a simple choice: either become a homeowner or rent from someone who is a homeowner.<\/p>\n

You may rationalize when you\u2019re young that you don\u2019t want to be tied down to a mortgage. But consider that when you\u2019re renting, you are still paying a mortgage: your landlord\u2019s!<\/p>\n

The problem with being a perpetual tenant is that the rent will never stop and your landlord will likely hike the rent in line with inflation. When you own your own home, the total outlay may exceed your rent in the first few years but eventually, as you pay down principal, more and more of your mortgage payments will be used to pay down still more principal, and less interest relative to principal.<\/p>\n

Tie this in with taking advantage of the annual prepayment privileges \u2013 generally 10 to 15 per cent of initial principal \u2013 and there will come a day when your mortgage is fully paid off. On that fine day, you\u2019ll no longer be paying interest or principal and the home will be owned free and clear. For the rest of your days, you\u2019ll be able to live rent-free!<\/p>\n

Let\u2019s say that took 10 years to accomplish. Compare it to the 10 years, if you continued to rent. In year 11, you\u2019d still be renting and likely shelling out a good deal more per month than when you first signed your lease. And unlike the mortgage, there would be no prospect of those rent payments ever ceasing. But the homeowner who paid off the mortgage after 10 years will forever more be living essentially rent-free, although of course there will still be property taxes, utility bills and perhaps maintenance fees if you own a condo.<\/p>\n

I don\u2019t know about you, but I\u2019d far rather enter retirement or semi-retirement with no mortgage, or any other debt for that matter. Not having to come up with the monthly rent means your monthly \u201cnut\u201d is that much lower. You won\u2019t have to earn as much and so will pay less income tax.<\/p>\n

But there are also several other benefits to having a paid-off home.<\/p>\n

First, a principal residence is a major form of tax shelter, right up there with owning your own business. That\u2019s because Ottawa does not tax any capital gains on your primary home. If you bought for $400,000 and years later sold for $800,000, you\u2019d have a tax-free capital gain of $400,000 that could be added to your retirement nest egg.<\/p>\n

Second, if you have a good chunk of equity in your home, it can be used as collateral for an emergency source of cash. You could have a Home Equity Line of Credit (HELOC) that could be used (though I advise against it) to renovate the home, put on an addition or go on a major vacation. Similarly, retirees with no heirs who find themselves house-rich but cash-poor could always resort to a reverse mortgage to convert some of the home\u2019s equity to a tax-free source of cash.<\/p>\n

Again, I wouldn\u2019t recommend this for most people and certainly not if your children or other heirs view such an act as potentially cutting into their inheritance. However, in certain situations this may be an option for those who really want to stay put and have few if any alternative sources of retirement income.<\/p>\n

A third possibility, which is really a variation of tapping your home\u2019s equity, is downsizing at some point. A typical retirement fantasy is to sell the suburban monster home and swap it for a downtown condo AND a cottage on a lake somewhere. Assuming the condo and cottage are each roughly half the price of the big home being sold, you\u2019d essentially be swapping one home for two. Because of the capital gains exemption on the principal residence there would be no tax consequences, although normal real estate brokerage commissions and land transfer taxes would have to be considered. Alternatively, you could sell the big-city home for a similarly large home in the country, perhaps getting \u201ctwice the house for half the money\u201d and adding the difference to your retirement kitty.<\/p>\n

Jonathan Chevreau blogs at <\/em>www.financialindependencehub.com<\/em><\/a> and other sites. He can be reached at jonathan@findependencehub.com<\/a><\/em><\/p>\n

Taken from:\u00a0http:\/\/business.financialpost.com\/personal-finance\/young-money\/eternal-truth-of-personal-finance-no-4-dont-be-a-renter<\/a><\/p>\n

——————-<\/p>\n

Thinking about moving from a rental into your first home? Contact Chris at chris@chrisbrownrealestate.ca or at 778-881-0673 to chat about the process and the market. It all starts with a cup of coffee.<\/p>\n","protected":false},"excerpt":{"rendered":"

No matter the business cycle or the trends, there are some things that never change when it comes to saving, building and managing money. Long-time Financial Post columnist Jonathan Chevreau presents the fourth instalment of the seven eternal truths of personal finance.<\/p>\n","protected":false},"author":2,"featured_media":279,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[12],"tags":[99,98,100],"class_list":["post-278","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-advice-for-buyers","tag-north-vacouver","tag-real-estate","tag-renting"],"_links":{"self":[{"href":"https:\/\/www.chrisbrownrealestate.ca\/blog\/wp-json\/wp\/v2\/posts\/278"}],"collection":[{"href":"https:\/\/www.chrisbrownrealestate.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.chrisbrownrealestate.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.chrisbrownrealestate.ca\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.chrisbrownrealestate.ca\/blog\/wp-json\/wp\/v2\/comments?post=278"}],"version-history":[{"count":4,"href":"https:\/\/www.chrisbrownrealestate.ca\/blog\/wp-json\/wp\/v2\/posts\/278\/revisions"}],"predecessor-version":[{"id":283,"href":"https:\/\/www.chrisbrownrealestate.ca\/blog\/wp-json\/wp\/v2\/posts\/278\/revisions\/283"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.chrisbrownrealestate.ca\/blog\/wp-json\/wp\/v2\/media\/279"}],"wp:attachment":[{"href":"https:\/\/www.chrisbrownrealestate.ca\/blog\/wp-json\/wp\/v2\/media?parent=278"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.chrisbrownrealestate.ca\/blog\/wp-json\/wp\/v2\/categories?post=278"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.chrisbrownrealestate.ca\/blog\/wp-json\/wp\/v2\/tags?post=278"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}