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Life Stages: Starting Out


Homeowner or renter for life?

4 min read

Owning a home has long been a traditional financial goal. Yet the mortgage stress testing that was introduced in 2018 can, for some, delay that goal or make it harder to reach because it reduces the mortgage amount applicants may qualify for.

Canadian house prices have soared to new heights recently and as a result, more and more young people see a future as a life-long renter. Even as some markets slow down, the high cost of real estate, home maintenance and property taxes puts homeownership out of reach for many young Canadians. In the long-term, what does renting mean for your financial success? Can you get ahead and even save for the future while paying rent?


Those who purchase a home can benefit from the “forced savings” reality of homeownership. They build savings through growing equity (the difference between the home’s value and the amount owed on it). As you make mortgage payments the amount you owe decreases, so paying down your mortgage quickly leaves more money to put toward savings.

Budgeting to save for a down payment and making regular mortgage payments forces a saving strategy. Many homeowners consider their home their retirement “nest egg,” knowing it can be sold to fund retirement. Owning a home can make you feel a little more secure: you live in a property you own, you don’t have to contend with rent hikes, or a landlord selling your home out from under you.

There’s no shame in renting

You shouldn’t feel defeated if you aren’t in a financial position to buy a home. The truth is, in some markets real estate is unrealistically costly. For those who juggle student debt and living expenses on an entry-level pay cheque, renting may be your only option.

There are some tangible perks to renting. You don’t have to deal with the stress and added costs of paying condo fees, property taxes, homeowners insurance, or household maintenance. In some real estate markets, monthly rent payments could be significantly less than mortgage payments. And depending on your rental agreement, you may not even have to foot the bill for utilities such as heat and hydro.

Saving for retirement as a renter

Being a life-long renter doesn’t mean sacrificing your retirement savings. While you won’t be building equity in a home, you can still save for the future.

Review your budget and set a retirement savings goal. Look for opportunities to invest any money you’re saving as a renter. For example, if you live close to work, you can save on gas and a vehicle by walking or taking public transportation. This simple approach can save you hundreds of dollars a month.

Consider opening a Tax Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP) to invest the money you don’t have to spend on home-related costs. Experts suggest saving at least 10% of your take-home pay each year for retirement, whether you’re renting or not. Remember, through the power of compound interest, even small amounts grow over time. Start saving early and automate your contribution. Before you know it, you’ll have quite a nest egg even if you don’t own a nest!

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