| In Canada, there is a program called the Home | | | | 1.38% to keep up with the dollar value of growth |
| Buyers Plan that allows home purchasers to withdraw | | | | that the $25,000 at 8% would return over a 15 year |
| a maximum of $25,000 from their retirement savings | | | | period. Historically, house values have appreciated in |
| accounts (known as an RRSP accounts) on a tax | | | | Canada at least 3% per year nationally, suggesting |
| free basis and repay those funds over the course of | | | | that people who invest in a house will be more than |
| 15 years. The funds must be used toward the | | | | two times better off. |
| purchase of a new home and the buyers must not | | | | Of course, there are other arguments to be made. |
| have used this program in the past unless the all | | | | One would be the matter of making mortgage |
| proceeds have been repaid for more than 5 years. | | | | payments and paying a lot of interest on that |
| The question that many Canadians have when | | | | mortgage. The alternative would be rent which, |
| deciding whether to use the Home Buyers Plan to | | | | although cheaper than a mortgage payment, would |
| come up with their minimum 5% down payment is | | | | result in no equity being built. After all, in the example |
| whether it makes sense to forfeit the future growth | | | | above, total mortgage interest over 15 years would |
| on their investments and invest, instead, in a home. | | | | amount to $195,923 assuming a fixed rate of 6%. |
| Without question, pulling out of a market-based | | | | Still, unless rent can all inclusive for an extremely |
| investment that yields even as much as 8% per year | | | | minimal amount, home ownership seems to have its |
| on a compounded basis makes sense to invest in the | | | | financial benefits. |
| housing market. To illustrate this example, consider a | | | | Lastly, there are many social and sociological benefits |
| home buyer who intends on using the $25,000 in | | | | to owning one's own home. Even if it means |
| their retirement account to purchase a house for | | | | withdrawing tax-free from a retirement account and |
| $275,000. | | | | repaying that amount over a fifteen year period, the |
| Even after paying mortgage default insurance fees, | | | | financial benefits far outweigh the disadvantages... by |
| that property would have to grow in value just | | | | a large margin. |