Key takeaways
- Owners pay mortgage interest, property tax, upkeep and closing costs; renters pay rent
- The fair test: the renter invests the down payment and any monthly savings
- Buying usually wins the longer you stay; selling costs make short stays expensive
- Home price growth and investment returns drive the result: test several scenarios
- Gains on your main home are generally tax-free in Canada
How the calculator compares renting and buying
Comparing rent with a mortgage payment is not enough. Part of a mortgage payment builds equity, but owners also pay property tax, maintenance, closing costs and selling costs, and their down payment cannot be invested elsewhere.
The calculator runs month by month:
- The owner pays the mortgage, property tax and maintenance. The home grows in value.
- The renter starts by investing the down payment and the closing costs the owner paid. Each month, if owning costs more than rent, the renter invests the difference. If rent costs more, the owner invests the difference.
- At the end, the owner sells the home, pays selling costs and the remaining mortgage. We compare the owner’s money with the renter’s investments.
Worked example
A family can rent a home for $2,600 a month or buy a similar one for $600,000 with $60,000 down at 4.5% over 25 years. Owning costs about $3,890 in the first month (mortgage, 0.8% property tax and 1% maintenance). With 3% home growth, 3% rent increases and a 5% investment return:
- After 1 year, the renter is ahead, because of closing costs and the 5% selling cost.
- After about 5 years, the owner pulls ahead.
- After 10 years, the owner has about $374,000 and the renter about $279,000.
If home prices grew 1% a year instead, renting would win at 10 years. Test your own numbers.
Choosing your assumptions
- Home price growth: nobody knows future prices. Try a low, middle and high case.
- Investment return: use a realistic figure after fees. A renter who does not actually invest the difference loses the main advantage of renting.
- Property tax: rates vary a lot by city. Use the property tax calculator.
- Closing costs: include land transfer tax, legal fees and inspection. CMHC suggests 1.5% to 4% of the price. See the closing costs calculator.
- Maintenance: 1% of the home’s value a year is a common rule of thumb; older homes may need more.
Things the calculator cannot measure
Renting gives flexibility: you can move for a job, change cities, or leave Canada without selling a home. Owning gives stability and control: no landlord, no forced moves, and freedom to renovate. Rent increases on many units are capped by provincial rules; check yours with the rent increase calculator.
Costs people forget when buying
- Land transfer tax (in Toronto, both provincial and municipal)
- Home inspection, legal fees and title insurance
- Moving costs, furniture and appliances
- Home insurance, which is higher than tenant insurance
- Condo special assessments, or a new roof or furnace in a house
Add these to the closing cost and maintenance percentages to test a cautious case.
Newcomers: rent first, then decide
Most newcomers rent for the first year or two. It gives you time to learn neighbourhoods, build a credit history, and get the stable job history lenders want. Meanwhile, open an FHSA to start your tax-free down payment room, and check what you could borrow with the mortgage affordability calculator. For your first lease, read renting your first apartment.