Buying a house may remain out of reach for many Canadians for the foreseeable future, with mortgage costs unlikely to fall enough to offset lofty home prices and weak spending power, economists and real estate agents say. 0 Even with expectations that Bank of Canada will keep cutting rates in the coming months, the issue of home affordability - which has strangled Prime Minister Justin Trudeau’s poll numbers - is unlikely to fade before the next election.
The mandate for the Liberal minority government ends at the end of October 2025, but an election could come well before then, with the Conservative opposition spoiling to end Trudeau’s nine-year run at the top.
“You won’t get back to an affordable range for housing on a sustained basis for a decade,” Tony Stillo, director at forecasting and analysis group Oxford Economics, said last week at a conference.
That’s not true at all. If you own your home outright (paid off your mortgage) or even if you’ve only paid off part of it, you can use it as leverage to borrow money you otherwise would not have access to. A common loan of this type is called a home equity line of credit.
Another thing you can do is what is called a reverse mortgage. This is where you effectively sell your house back to the bank but continue to live there rent-free. In exchange, the bank gives you a monthly payment based on the value of the home. You can often see TV ads for this sort of financial instrument. They’re very popular with retired folks who would like some extra money to travel or take up new hobbies.
Is the HELOC free? Are the reverse mortgages free? Aren’t they just swapping downgrading your living conditions with making less money than you could have? I think you’re just presenting another alternative to capitalize some of your primary home, not really disproving the general point.
You said you had to buy a cheaper home to make money from the equity in your home. That is not true, and the examples I have showed how.
As for “free”, what is free is the increase in value of your home over time. That’s the investment part. There are people who bought homes in San Francisco back in the 1970’s who are now multi-millionaires simply due to the many-fold increase in the value of their home. With a HELOC or a reverse mortgage they can gain access to some or all of that money without needing to move to a cheaper house.