Conventional wisdom says that home ownership is the smartest route to financial security, but it’s also important to buy within your means.DrazenZigic/Getty Images
In this series, Sliding Doors, we explore real-life crossroads that shape personal ambition: Take the leap or play it safe? Move forward or pivot? We talk to real people facing real-life decisions and speak to experts about the ambition and intuition behind these kinds of choices.
Peter Gorman is a music librarian who lives with his wife and two school-aged children in a small, two-bedroom co-op apartment in downtown Toronto.
Gorman and his wife, Sophia Bearden, are professionals – people you might expect to own a house and a minivan outside the city’s core. But whenever the couple considers what that would look like, the numbers don’t add up.
“We are able to live comfortably now and don’t have to think about whether we can afford to take a vacation or a weekend trip,” Gorman says. “If we had to pay a mortgage every month, suddenly housing goes from being 20 per cent of our income to almost all of it.”
Instead of spending money on a down payment and mortgage, the couple has been able to save for retirement and other long-term plans. They enjoy living in the city and walking, cycling and using public transit to get around. Not owning a car is saving them even more money.
Still, as their children grow, the couple wonders how long they’ll be happy in their small co-op unit. If they do decide to move, what options do they have?
Shannon Lee Simmons, a financial planner who often works with young families trying to buy a home, tells her clients that they should be able pay for their housing costs and still save for retirement and live comfortably. Ideally, fixed expenses should not be more than 50 per cent of their take home pay.
“I would rather somebody rent affordably and double down on savings than be house poor,” she says.
Home ownership provides options
Sophia Bearden and Peter Gorman in the shared backyard of their co-op apartment. ‘We’re here for the foreseeable future and that suits us pretty well,’ he says.Ambrose Gorman
For decades, conventional wisdom held that home ownership is the smartest route to financial security. What’s more, in the past 25 years, homeowners have seen the value of their houses double, triple or quadruple over the course of their mortgages. The Canada Mortgage and Housing Corporation (CMHC) reports that the average price of a detached home in Canada increased from $266,543 in 2006 to $627,000 in 2021.
Owning a home gives people options later in life, once their mortgages are paid off: they can sell their homes and cash in on their equity or live mortgage-free.
But Simmons says this only makes sense if you buy within your means. She sees people who have had to refinance their homes to make ends meet. “They get to a place in retirement where there are no savings [and] not a lot of equity despite the value of their house going up and they’re forced to downsize,” she says.
It’s not just the mortgage payments that prospective buyers need to consider. Simmons says they also need to factor in the extra costs of owning a house compared with renting. These include fees and taxes when you buy property, mortgage insurance, utilities like water and gas (which are often included in the price of rent), and the costs of maintaining a home when you need to replace the roof or a furnace.
If you rent, rent smart
With all those reasons in mind, Simmons often advises clients to rent in order to live within their means. Instead of spending money on a hefty down payment and large mortgage payments, they can put more money toward retirement savings and other financial goals.
If you plan to keep renting into retirement, Simmons recommends finding a suitable apartment in a purpose-built rental building as opposed to renting a condo or an apartment in someone’s home. “In a building, the chances of being evicted or the house being sold are much lower, so you have security and you can count on what your cost of living will be.”
Unfortunately, rents are on the rise in Canada. CMHC reports that the average rent for a two-bedroom apartment has increased from $1,167 in 2021, to $1,447 in 2024 – and rents in many cities far exceed those averages. This puts a financial strain on Canadians who might not be able to find a rental home for less than half of their take-home pay.
Creative solutions
Simmons says she has seen clients turn to co-ownership or even co-rental arrangements. If two young families buy a duplex with separate living quarters, that can make home ownership affordable once again.
Communal rental living is another option Simmons says might be good for older people. “I’ve seen a Golden Girls-type situation with women who are older and want to live in a specific place because of community and walkability. On their own pensions and saving, they can’t afford it, but they can if they find other people in the same situation.”
Many young families are also tapping into the housing market with the help of their parents, Simmons says. “Generational wealth is one of the key things in the last five to 10 years that makes buying a house possible, but no one talks about it.” She warns young people not to compare themselves with their peers because it’s not always an even playing field.
For their part, Gorman and his wife say they know how lucky they are to have a co-op home in a community they love. Non-profit housing options like these are very hard to find and have years-long wait lists.
“Our apartment may be small, but we have big windows, high ceilings and a nice, shared backyard,” Gorman says. “We’re here for the foreseeable future and that suits us pretty well.”
