We are again in a period of economic uncertainty and we all wonder if there is a safe place to put our hard earned savings. The answer is…..you could be living in it. The strategy of buying a home (if you are renting) can pay off many years into the future. While no one likes to have a mortgage you should really think of it as an investment.
Lets take an example of a renter buying their first home in the year 2000. We’ll assume it was bought for the average price in Toronto (at the time) of approx. $250,000. Assuming you had put 5% down and the interest rate averaged is 5% over 25 years. Now fast forward 11 years to 2011, your debt is down to $170,000. …..however, the value of your “average priced home” in Toronto is now $450,000 which means you have earned (the equity in your home) of $275,000 in 11 years (that is $25,000 per year) all TAX FREE. The mortgage in this example would be approx $1,400 per month ($16,800 year)……so the home yearly increase in value would have offset your mortgage cost PLUS over $8,000 per year……your living in an investment. This example above is taken in a very good market where the average prices increased about 7%…….but in the long term your can expect to get 4% compounded. Therefore, your $250,000 home will likely be worth easily over $700,000 and possibly close to a million dollars in 2025…..a very nice tax free amount when you are heading toward retirement.
If you are thinking about a mortgage please please call me at 416 994 5281. Or send me an email at firstname.lastname@example.org