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Does Owning a Home Make You More Financially Responsible?

26 February 2013

This morning we looked at a very controversial topic when it comes to home ownership: the classic battle between renting versus buying, and whether or not costs for the two actually do equal out to about the same. Now though we want to take a look at another controversial statement, this time made by Canada Mortgage News, who believe that owning a home makes you more financially responsible.

The statement recently made on CMN’s site was, “If you own a house and have a mortgage, you will be motivated to work hard and perform. You have more to lose.” But, is this really true?

Arguments for the statement of course, will say that you are more financially responsible when you own a home because, well, you own a home. You have a lender who expects their payment every month on the same day, and if you miss one or two, the chances are very good that you will lose your home and not have a place to live.

When owning a home, you also have many unexpected expenses such as furnaces that break in the middle of the night, and roofs that need fixing. Because of this, homeowners might be more likely to have some extra cash socked away so that you can be prepared for it should these things ever happen.

But are these really good arguments?

If you’re a renter, you will also have to pay for your housing costs, probably to a landlord or a property management company that will also expect it every month, on the same day. And if you miss these payments, that landlord could also evict you from the home, leaving you with no place to live – and in the exact same position as a homeowner who has just lost their home due to non-payment.

And what about the unforeseen expenses of renters? Do they not have any simply because they don’t own a home? What if one of their parents, or their child gets sick? Or, what if the amount of their rent is increased – something that doesn’t happen to homeowners unless interest rates rise? Renters, just like homeowners, still have unexpected expenses rise, and they’ll still need to be financially responsible enough to have some money stashed away for them.

Of course, you could also pick the statement apart and say that, unlike the statement insinuates, homeowners without mortgages are actually even more financially responsible than homeowners with mortgages. They’ve obviously paid off their mortgage and so, one could argue, they’re better with money.

And even those that aren’t homeowners at all might be more financially responsible than those that are. After all, consider that there are people renting right now in the hottest markets, but sitting on the sidelines until prices come down a bit so that they can really make the best use of their money. That’s definitely a smarter move than the “last condo buyer in Toronto” at the height of the boom.

So, are homeowners more financially responsible than renters? We don’t know. But we do think that labeling one group more financially responsible than another, very large group may be a bit unfair. What do you think?

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