Rent vs Buy in Canada: Run the Real Numbers
Loading article…
Rent vs buy is rarely a question of rent versus mortgage payment. A monthly payment that looks close to your rent hides property tax, maintenance, insurance, closing costs, and selling costs. On the other side, renting frees your down payment, which can be invested. This guide, part of our mortgage guides, walks through every line with our rent vs buy calculator and one hypothetical household.
The example below is an illustration, not a forecast. Change any assumption and the winner can flip, which is the main lesson.
How the rent vs buy comparison works
The fair way to compare is to look at what you own at the end, not what you pay each month. A buyer ends up with home equity, minus the cost of selling. A renter ends up with an investment portfolio, built from the money they did not put into the house.
Our calculator follows that logic. It counts every cost of owning, compares it each year with the cost of renting, and assumes the renter invests:
- the down payment the buyer would have put into the home;
- the closing costs the buyer would have paid at purchase;
- the monthly gap whenever owning costs more than renting.
It then compares the buyer's equity after 5% selling costs with the renter's portfolio. That second number is the opportunity cost of the down payment, and it is the part most rent vs buy debates leave out.
The hidden costs of owning
Your mortgage payment is only part of what a home costs. CMHC's list of homebuying costs includes many one-time expenses that never show up in a payment estimate.
One-time costs at purchase
At closing, you can face an appraisal fee, a home inspection, legal fees, title insurance, land registration, and adjustments for prepaid property taxes or utilities. Most provinces also charge a land transfer tax, often the largest closing cost. Check yours with our land transfer tax calculator.
Then come the costs of moving in: moving expenses, appliances, window coverings, tools, and early repairs. If you put down less than 20%, the mortgage insurance premium is added to the loan. Our mortgage insurance guide explains how it works.
Ongoing costs
Every year, an owner pays property tax, home insurance, and maintenance, on top of interest. Condo owners also pay condo fees. Unlike rent, these costs tend to rise with the value of the home, and a single repair, such as a roof or a furnace, can cost thousands at once.
A renter has fewer of these costs. The main extra is tenant insurance, which protects belongings and liability. Our guide to tenant insurance costs shows what to budget.
Our hypothetical example
To show the trade-off, we ran the default scenario of our calculator. All inputs are assumptions, not market data:
- Home price: $500,000, with a $100,000 down payment (20%), so no mortgage insurance.
- Mortgage: $400,000 at 4.5% over 25 years.
- Property tax and maintenance: 1% of the home's value each, per year.
- Closing costs: $15,000 for land transfer tax and legal fees.
- Home appreciation: 3% per year.
- Rent: $2,200 a month, rising 2.5% per year.
- Investment return: 6% per year on the renter's portfolio.
The calculator also adds home insurance at 0.4% of the home's value for the owner, $25 a month of tenant insurance for the renter, and 5% selling costs at the end.
Year one, month by month
- Owner's monthly cost: about $3,214, including a $2,214 mortgage payment, close to the rent.
- Property tax, maintenance, and insurance: about $1,000 more each month.
- Renter's monthly cost: about $2,225, tenant insurance included.
Of the mortgage payments made in the first year, about $17,653 is interest. The renter, meanwhile, invests the $115,000 the buyer put into the down payment and closing costs, plus the monthly gap of about $989.
The result after 10 years
After 10 years, in this scenario, here is where each household stands:
- Home value: $671,958, with a mortgage balance of $290,206.
- Buyer's net position after 5% selling costs: $348,154.
- Renter's portfolio: $354,058.
| Year | Buyer, after selling costs | Renter portfolio | Ahead |
|---|---|---|---|
| Year 1 | $98,164 | $134,291 | Renter |
| Year 5 | $199,470 | $220,772 | Renter |
| Year 10 | $348,154 | $354,058 | Renter |
| Year 15 | $526,004 | $523,552 | Buyer, barely |
Renting comes out ahead by $5,904. The gap is small, and it closes with time: by 15 years, buying edges ahead by $2,452. A small change in one assumption is enough to reverse the verdict.
Which assumptions matter most
Two inputs drive almost everything: how fast the home appreciates and what the renter earns on their investments. Here is what happens at 10 years when we change one at a time, all other inputs equal:
| Scenario | Buyer, after selling costs | Renter portfolio | Ahead |
|---|---|---|---|
| Default case (3% appreciation, 6% return) | $348,154 | $354,058 | Renter by $5,904 |
| Appreciation at 2% a year | $288,816 | $346,607 | Renter by $57,791 |
| Appreciation at 4% a year | $412,910 | $361,895 | Buyer by $51,015 |
| Investment return at 4% a year | $348,154 | $300,935 | Buyer by $47,219 |
| Investment return at 7% a year | $348,154 | $384,448 | Renter by $36,294 |
These are not forecasts. They show why a general rule like "renting is throwing money away" does not hold up. It depends on your city, your rent, your rate, and your discipline.
What the calculator cannot see
Some factors decide the question but do not fit in a formula.
The renter's advantage assumes the money is actually invested, every month, for 10 years. If the gap is spent instead, buying usually wins, because mortgage payments force you to save. Taxes also matter. A gain on your principal residence is generally not taxed if the home was your principal residence for every year you owned it, according to the CRA's capital gains guide, and you must report the sale. The renter's return is tax-free only inside a TFSA, RRSP, or FHSA, within their limits. Our TFSA guide covers how that works.
Then come the non-financial factors: stability, the freedom to renovate, flexibility to move for a job, and the time spent on repairs. They deserve a place in the decision too.
When buying tends to make sense
- You plan to stay a long time: closing and selling costs are paid once, so a longer stay spreads them over more years.
- Local rents are high compared with prices: the higher your rent relative to the home's price, the stronger the case for buying.
- You would not invest the difference: if the money saved by renting would be spent, the forced savings of a mortgage favour buying.
- You have a full cushion: your down payment, closing costs, and an emergency fund are covered without draining your savings.
- You value stability: no risk of a lease ending, and the freedom to renovate.
Conclusion
Rent vs buy is a comparison of two net worths, not of two monthly payments. Owning carries closing costs, property tax, maintenance, insurance, and selling costs that a payment estimate ignores. Renting frees your down payment, but only pays off if you invest it with discipline. In our hypothetical example, the two paths end within a few thousand dollars after 10 years, and small changes in appreciation or returns decide the winner. Plug in your own numbers before you decide, and check what you can borrow with our affordability calculator.
Get our latest rate updates and mortgage guides by subscribing to the Ratesopedia newsletter.
Frequently asked questions about renting vs buying
Is it cheaper to rent or buy in Canada?
It depends on your city, your rent, the price of the home, and how you invest the difference. In our hypothetical example, a $500,000 home and $2,200 rent end within $5,904 of each other after 10 years. Small changes in home appreciation or investment returns change the winner. Test your own situation with our rent vs buy calculator.
What hidden costs come with owning a home?
Beyond the mortgage, owners pay property tax, home insurance, maintenance, and condo fees where they apply. At purchase, they face closing costs such as land transfer tax, legal fees, inspection, and appraisal. When they sell, they pay selling costs, often commissions. Estimate the largest closing cost with our land transfer tax calculator.
What is the opportunity cost of a down payment?
It is the return you give up by putting money into a home instead of investing it. In our example, the renter invests the $115,000 the buyer spends on the down payment and closing costs. That money grows over 10 years, which is why renting can come out ahead. Compare growth scenarios with our compound interest calculator.
Is renting throwing money away?
No. Rent buys housing, just as mortgage interest, property tax, and maintenance do for an owner. In the first year of our example, the owner pays about $17,653 in mortgage interest alone, on top of other costs. What matters is the net position at the end, not whether part of a payment builds equity. Our mortgage payment calculator shows how much of each payment goes to interest.
How long should I stay in a home for buying to pay off?
There is no universal break-even point. Closing costs and selling costs are paid only once, so the longer you stay, the more time you have to recover them. In our example, renting stays ahead through year 10, and buying edges ahead by year 15. Run your own horizon in the rent vs buy calculator.
How much do I need to save before buying?
You need the minimum down payment, which is 5% on the first $500,000 of the price, plus closing costs and an emergency fund for repairs. A 20% down payment avoids mortgage insurance. Check your numbers with our down payment calculator, and read our guide to mortgage pre-approval.
Read next
