MONEY PIP article – How to Make Your Home a Good Investment: Financial Wisdom from Toronto-based Financial Planner Ed Rempel

Is Your Home Really a Good Investment?

Most Canadians think so. My experience tells a different story.

For decades, Canadians have been told that their home is their best investment. After preparing thousands of financial plans, I’ve found that this belief often leads people to rely too heavily on home equity for their retirement.

The long-term data is clear:

• Toronto real estate has grown about 6.3% per year for the last 50 years.
• The Toronto stock market has grown nearly seven times more.
• The U.S. market has grown 17 times more.
• Most retirees need $2–5 million invested to support the lifestyle they want. This is much more than the average home is worth.

A home with a large mortgage can produce strong returns because of leverage.

A paid-off home, however, usually provides only moderate growth, and no retirement cash flow unless the equity is accessed.

In this article, I outline why homeowners often appear wealthier than renters, the role of forced savings and leverage, and how strategies like longer amortizations or the Smith Manoeuvre can help keep your home working for you.

If you want a clearer understanding of where your home actually fits in your long-term financial plan, this is a good place to start.

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Money Pip article: How to Make Your Home a Good Investment: Financial Wisdom from Toronto-based Financial Planner Ed Rempel

For decades, Canadians have heard the familiar saying: “Your home is your best investment.” In a country where homeownership is often treated as the ultimate financial milestone, this belief feels almost like a cultural truth. But according to Toronto-based financial advisor Ed Rempel, relying too heavily on home equity can be a risky approach to building wealth and preparing for retirement.

Rempel, who has written extensively on personal finance and retirement planning, argues that while real estate has its place, it is far from the best-performing asset over the long run. “For many people, their home may be their only major investment. For them, that old conventional wisdom might be true. But that is unfortunate. It is easy to find better investments with dramatically higher long-term returns.”

The data bears this out. Over the last fifty years, the average home in Toronto has grown in value by about 6.3% annually. That is a respectable return compared to GICs, but far below the performance of equities. Rempel points out that the Toronto stock market has delivered nearly seven times the growth of Toronto real estate the last 50 years. Even more, the U.S. stock market has delivered nearly 17 times the growth and global markets nearly 13 times the growth of Toronto real estate the last 50 years. This gap matters most when people are planning for retirement.

Many Canadians assume their home will serve as their retirement nest egg, either by downsizing or selling altogether. Yet the numbers suggest this is rarely sufficient. “We have written financial plans for thousands of Canadians. Everyone is unique. The total investments most need to retire with the lifestyle they want are between $2 million to $5 million,” Rempel explains. Considering that the average Toronto home is just over $1 million, the gap becomes clear. Even if homeowners sell and invest their proceeds, the total is often not enough to sustain the kind of lifestyle most retirees hope for. 

Still, statistics consistently show that homeowners tend to be wealthier than renters. Rempel explains this apparent contradiction through two behavioural forces that tilt the scales in homeowners’ favour. The first is forced savings. Mortgage payments are not optional, and over time, they steadily build equity in the property. Renters often enjoy significantly lower monthly costs, but unless they have the discipline to invest the difference, they are less likely to accumulate wealth in the same way. 

The second factor is leverage. With a 20% down payment, homeowners are able to control an asset worth five times their initial investment. This magnifies returns in the early years of ownership. If a $1 million home rises in value by just six percent, the $60,000 gain represents a 30% return on the $200,000 invested. That level of return is remarkable, but it only lasts while there is still a significant mortgage in place. As the mortgage is gradually paid down, the effect of leverage fades. Once a home is fully paid off, the return is limited to the modest annual appreciation of the property itself. 

This creates a paradox that surprises many people. A heavily mortgaged home can be an excellent investment because of the leverage effect, but as the mortgage disappears, the investment appeal of the property declines. Homeowners then find themselves sitting on what Rempel calls “dead equity”. Unlike a diversified portfolio, home equity does not usually generate cash flow, nor does it grow as quickly as equities. This becomes especially problematic in retirement, when steady income and reliable growth are both essential. Your home equity does not support your financial freedom and retirement goal nearly as much as it could if you invested it more effectively,” Rempel says.

Should your home even be considered for providing for your retirement? 93% of Canadian homeowners aged 65 and older intend to stay in their current home throughout retirement, according to a HomeEquity Bank survey of over 1,000 Canadians conducted with Ipsos. This strong preference is driven by emotional attachments, proximity to family and community, and the desire for stability. Unless you access your home equity in some way, your home provides no cash flow at all for your retirement.

That does not mean a home has no place in a financial plan. The secret is to treat it realistically and to understand how to keep it working for you. One option is to pay down the mortgage slowly, using a longer amortization period to keep payments manageable and investing the difference in higher-growth assets. Another is to use more advanced strategies such as the Smith Manoeuvre, which allows homeowners to borrow the principal portion of each mortgage payment and invest it, gradually turning the mortgage into a tax-deductible investment loan while maintaining leverage on the property. 

Both approaches require discipline. Lowering monthly mortgage payments only helps if the savings are invested consistently. Otherwise, the benefit of leverage is lost without any compensating growth from other assets. For those serious about financial independence, the lesson is clear: your home can be part of the plan, but it should not be the plan itself.

Home ownership offers undeniable emotional rewards. Stability, pride of ownership, and the comfort of a familiar place to live are all valuable. But when judged strictly on financial performance, a home is not the powerhouse investment many Canadians believe it to be. As Rempel puts it, “A home with a large mortgage is usually a great investment. A paid-off home is usually only a moderate return.”

For anyone hoping to retire comfortably, the path lies in building a diversified portfolio that delivers growth and freedom over the long run. 

Ed