519-646-2222The Case for Selling your House
Canadians are desperately clinging to their homes while sinking deeper into debt. For many, the logic simply doesn’t add up—and here’s why:
Buying a House Is Not an Investment
When you acquire an investment, you do so with the reasonable expectation of growth, along with the flexibility to move from a non-performing asset to one that generates returns.
Investing is always about growth, and for successful investors, it’s about recognizing patterns and following market trends.
Buying a house, however, is extremely costly and a very emotional decision. Beyond the steep upfront costs, mobility costs are very high—selling one home and buying another typically means losing about 8% of the value.
The Mortgage Trap
When you pay a mortgage, the returns are heavily skewed in the bank’s favour. The bank controls the interest rate through constant tweaks and adjustments. On top of that, you’re responsible for property maintenance and municipal taxes.
The housing market has always been in flux and is widely misunderstood by homeowners. For example, let’s say you bought a house 25 years ago for $300,000 and sold it today for $650,000. On paper, it looks like you made $350,000. Even the CRA would suggest you did—but the reality is quite different.
The Reality Check
After adjusting for inflation, that $300,000 purchase is equivalent to $516,440 today. Over the life of the mortgage, you’ve paid about $345,000 in interest at an average rate of 7%.
Here’s what it really looks like:
- Original purchase price: $300,000
- Current value (inflation-adjusted): $516,440
- Interest paid: $345,000
- Average maintenance: $4,250 per year × 25 years = $106,250
- Selling costs (commissions, conveyance, etc.): $40,000
You sold the home for $650,000, but by then you had already paid:
- $650,000 (principal + interest)
- $106,250 (maintenance)
- $40,000 (selling costs)
Total: $796,250
That leaves you with a net loss of $146,250.
The Bottom Line
What many consider an “investment” turns out to be a costly financial trap once all expenses are accounted for. Far from being a wealth-building strategy, homeownership in this scenario is a losing proposition.
All of that having been said, don’t struggle to hang onto a house you cannot afford, let it go and move on with your life. After all it’s only a place to hang your hat.