K96.3 Radio Wealth Management Topic

Canadian mortgage debt is $1 trillion, highest ever. Canadian Mortgage association says Cdn homeowners on solid footing, not overextended. The home is fundamental platform for financial health - wealth creation.

We consider owning a home as a fundamental part of your financial plan. Canadians with debt have an average of $150,000 or 50% equity so it can represent a good chunk of your net worth. Compare that with the US where poeple have a negative equity position and I think we are in better shape than our neighbours. It is definetly preferable to renting in most scenarios because it is almost like a forced savings with some potential for appreciation. Where it can be a problem is if interest rates rise. Today a 5 year mortgage rate is less than 4%, amortized over 25 years, a $100,000 mortgage payment is $526 per month. If we run the numbers. For every 2% increase in rates your payment jumps by approxiamately $100per month. Provided you can withstand a rate increase in the future I think it's okay to have some mortgage debt. The second issue is liquidity, if you have to sell your home and prices are falling you may experience a loss. The main point is that it is something you should look at as a long term asset that forms part of a balanced approach.