Can your house make you richer?

With some houses in her neighbourhood now selling for seven figures, Sandra wonders if it's time to cash in the equity on her own home.

Photo by RapidEye/iStockphoto.com

Hello, my name is Sandra, and I’m an MLS addict.

Even though I love my house — the “forever house” whose purchase prompted me to start this blog three and a half years ago — I’m continually logging on to the Realtor.ca website to browse properties for sale in my area, snoop inside at their owners’ decor choices and, most importantly, get a sense of how much my house might sell for today.

A house is more than a place to live. For most families, it’s their biggest investment. And when housing prices go up, so does their return on investment. If you aren’t familiar with that term: The interest you earn on a savings account is a return on investment; so is the dividend payment on a bond, and the increase in price of a stock that you hold in your RRSP.

In most markets across Canada, house prices have been rising for the past dozen years, making many of us homeowners feel quietly rich. The thing is, that return isn’t guaranteed until you sell your house and actually collect that increase in market value, and have it in your hot little hands (or your bank account). Same goes for stocks that you invest in: The price could skyrocket (like Research in Motion, makers of the BlackBerry, once did), but if you don’t sell when the price is high, then the price drops again (like Research in Motion currently), you can’t collect that return on investment.

I’ve been lucky with real estate. I bought my first property at 25, borrowing out of my own RRSPs (under the Home Buyers’ Plan) to boost my down payment. Thanks to my father’s eagle eye (he had been reading the New in Homes section from the newspaper while I was out apartment-hunting), I got in on a loft conversion in an “up and coming” (read: somewhat scary then, but now very well-developed) part of downtown Toronto, for $115,900. Yes, you read that right. It was 860 square feet, with a laundry room, large bathroom and huge windows, plus parking and a storage locker. My mortgage payments, utilities, taxes and condo fees cost less than the rent on any of the apartments I had looked at previously.

After Matt and I got married, three years later, I sold the place for a sweet $219,000, and put the return on investment into our new home, a wide three-bedroom semi with a garage and a bit of backyard, which we bought for $280,000, then sold for $480,000 five years later.

So we have a pretty nice chunk of equity to our names (equity is the current market value of your home, minus how much you owe on hour mortgage). And now, every once in a while, Matt and I fantasize about cashing in our Toronto home and moving to a community where housing prices are lower and would allow us to live mortgage-free.

According to an article in this week’s Globe and Mail, this might be the ideal time to act on that fantasy. Some economists predict that Canadian home prices, which many have been calling inflated for a while now, are headed for a “correction” — in other words, they’re going to go down, just like the price of Research in Motion stock.

The thing is, we love our house and our neighbours. It’s close to the kids’ school and friends. Is the chance to pocket some of our return on investment reason enough to uproot them — and us? I’m curious to hear what you’d do.

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