TLDR;
Mark Ting from Foundation Wealth discusses the financial implications of renting versus buying in the current Canadian market. He highlights that in many cities, renting can be significantly cheaper than owning a comparable home, especially when considering mortgage payments, property taxes, and insurance. He also touches on strategies for renters to strengthen their financial position and the potential benefits of home ownership, such as building equity and tax-free gains.
- Renting can be significantly cheaper than owning in many cities.
- Renters can strengthen their financial position by investing the difference between renting and owning costs.
- Home ownership offers benefits like building equity and potential tax-free gains.
Renting vs. Buying: Initial Cost Comparison [0:29]
Mark compares the monthly costs of renting versus buying, using his own house in Richmond as an example. He estimates renting a similar house would cost around $4,500 per month. Owning his house, valued at $1.7 million with a 20% down payment, would incur monthly costs of approximately $10,000 on a 25-year amortisation, including mortgage, property tax, insurance, and utilities. For a one-bedroom condo in Mount Pleasant, renting would cost about $2,850 per month, while owning would be around $4,240, about 30% higher than renting.
Addressing the "Throwing Away Money" Argument [2:34]
Mark disagrees with the notion that renting is "throwing away money," arguing that everyone needs a place to live. He points out that current market conditions often mean landlords aren't necessarily having their mortgages paid down by renters. Using the house example, the rent of $4,500 doesn't even cover the interest costs on the mortgage, as the majority of early mortgage payments go towards interest rather than principal.
Strategies for Renters to Improve Financial Health [3:46]
Mark suggests that renters should take the money they save by renting and invest it consistently, perhaps in a TFSA (Tax-Free Savings Account) or RRSP (Registered Retirement Savings Plan). For example, if the cost of owning a condo in Mount Pleasant is $4,300 and renting is $2,900, the $1,400 difference should be invested. This strategy helps renters get used to making higher payments, preparing them for future home ownership.
Reasons to Still Consider Buying a Home [4:51]
Mark outlines several reasons why buying a home can still be a good decision. Owning a home is a dream for many, and it offers potential tax advantages, such as tax-free gains on the increased value of the property. Additionally, a home can be used as collateral to borrow money for business ventures or other investments. Over time, mortgage payments shift towards principal, which can be very satisfying for homeowners.
Personal Perspective and Market Observations [5:48]
Mark shares that he has no plans to sell his home due to his stage in life and the hassle involved in selling and finding a new place to live. However, he suggests that a younger homeowner, particularly one who recently bought and is feeling financially stretched, might consider selling, renting, and investing the difference. He observes that the market is showing signs of recovery, with increased buying activity and potential for further interest rate cuts, suggesting a busier but not "super busy" autumn.