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Homeowners in America are worth 40 times more than renters. The median homeowner has a net worth of $400,000 while the median renter sits at $10,400.

This gap exists because most people fundamentally misunderstand how leverage works.

I’ve spent over a decade helping 500+ clients build wealth through strategic mortgage use. The biggest mistake I see is people comparing monthly payments instead of actual invested capital and returns.

When you buy a $500,000 home with 20% down, you invest $100,000 of your own money. The bank lends you the other $400,000.

If that home appreciates at 4% annually, it gains $20,000 in value.

Here’s where people mess up the calculation. They think they earned 4% on their investment. But you didn’t invest $500,000. You invested $100,000.

That $20,000 gain represents a 20% return on your actual cash invested.

Compare that to stocks. When you buy $100,000 in stocks, you put in 100% of the money. An 8% return gives you $8,000. The stock market has averaged around 8-10% over the past 20 years.

The homeowner gets $20,000. The stock investor gets $8,000. Same initial investment.

This is leverage. You’re earning returns on money you borrowed, not just money you put in.

The popular argument goes like this: rent is cheaper than owning, so invest the difference and you’ll come out ahead.

I’ve worked with hundreds of clients over the years. I can count on one hand how many renters actually do this consistently.

Life gets in the way. Vacations happen. You rent a bigger place than you need. The “difference” gets spent, not invested.

But let’s say you’re disciplined. Let’s run the actual numbers over 25 years.

Person A buys a $500,000 home with $100,000 down (20%). Add $7,000 in closing costs. Their mortgage payment is $2,213 per month at 4.5%. They pay $500 monthly in condo fees and $2,500 annually in property tax. Both increase 2% per year. The home appreciates 4% annually.

Person B rents for $2,500 per month. Rent increases 2% annually. They invest the $107,000 upfront costs and the monthly difference between renting and owning. They earn 8% annual returns with no selling costs.

After 25 years, Person A (the homeowner) ends with $1,257,608.

Person B (the renter who actually invested every month for 25 years) ends with $698,813.

The homeowner finishes ahead by $558,795. Nearly double the renter’s wealth.

And remember, this assumes the renter had the discipline to invest consistently for 25 years. Most don’t.

When you make a mortgage payment, part of it pays down your principal. This happens automatically every month for 25 or 30 years.

You can’t skip it. You can’t spend it on something else. It builds equity whether you’re paying attention or not.

The National Association of Realtors calls this a forced savings account. It’s one of the main reasons homeowners accumulate 40 times more wealth than renters.

Renters have to rely 100% on voluntary investing. They’re missing out on the automated wealth accumulation that homeownership provides.

If your budgeting is done right, you’re doing both. You’re paying down your mortgage and investing in RRSPs, TFSAs, or other accounts. Homeownership doesn’t replace investing. It complements it.

There are only two primary wealth escalators in North America: stocks and real estate.

Americans hold $34 trillion in home equity and $45 trillion in retirement accounts (primarily stocks). That’s $79 trillion in household wealth. These two vehicles account for the vast majority of wealth among ordinary people.

For middle-income Americans, home equity represents 50-70% of their net wealth. At the lowest income levels, 92% of homeowner net worth comes from residential property.

Any financial strategy that excludes both escalators guarantees you’ll be left behind economically.

Real estate gives you something stocks don’t: leverage. You can control a $500,000 asset with $100,000. Try doing that with stocks.

When you buy a home, you lock in your housing cost on day one. Your mortgage payment stays the same for the life of your term (assuming interest rates don’t shift to much).

When you rent, your cost increases every year. Ontario caps rent increases at 2.5%, with 2026 set at 2.1%. But among renters nationally, median rent jumped about 10% each year from 2022 to 2024.

Let’s say you’re paying $2,500 in rent today. With 2% annual increases, you’ll pay $3,000 per month in 10 years. That’s a $6,000 annual increase over the decade.

If you owned, your property tax might increase $500 per year and condo fees $100 per month. That’s a $1,700 annual increase.

The gap between renting and owning grows every single year. The “invest the difference” math falls apart when the difference keeps shrinking and eventually disappears.

The wealth gap between homeowners and renters will continue to grow. The chance of you becoming a homeowner drops significantly if your parents weren’t homeowners.

Homeownership is part of a wealth transfer from you to future generations of your family. It’s one of the most accessible ways to build and pass on wealth.

While homeownership is still attainable in North America, there are cities all over Europe where it’s simply out of reach for most people. Using real estate as a tool to build wealth makes it easier on yourself.

The more you can automate your wealth building, the more you can make it predictable, the better off you’ll be.

The leverage blind spot keeps people locked out of wealth building. Understanding how returns actually calculate on your invested capital changes everything.

You’re not earning 4% on a home that appreciates 4%. You’re earning 20% on the cash you actually put in. That’s the difference between building wealth and watching others build it.

Most people compare monthly payments.
Very few look at leverage, forced savings, and how returns are actually calculated on invested capital.
That’s where the real difference shows up over time.