Perhaps one of the most important questions for many millennials is the question of whether to take one’s savings and invest said money, or use the cash as a down payment for a house.
Home ownership is often the key/primary life goal for many, and checking that box first may seem like the only way to go.
Many, however, do not want to deal with the headaches and added expenses of home ownership, and would much prefer to invest their money in the market for the long term.
For those looking to buy a house - this can be an incredibly good decision right now, for a few reasons. Interest rates are at historic lows, meaning one’s debt service ratio is unlikely to worsen if one is able to lock in a long-term mortgage.
Second, many housing markets across the country have outperformed the TSX from a return standpoint, so suggesting that the stock market will always outperform home ownership is not necessarily true. If one is willing to put in the work, and pay off the mortgage in 25 years, this can be an excellent way to save for retirement.
For those looking to earn extra return in the stock market, the key is to actually invest one’s excess income, rather than spend it. This can be hard for some.
Assuming you are able to religiously do so, the average return you will be able to receive should, over the long run, turn out better for you than buying a house.
That said, tax implications (capital gains) are different between a primary residence and a stock portfolio, so there will be some additional work on the tax end.
Invest wisely, my friends.
