Should you buy a home or continue renting?
For many Canadians, this is one of the biggest financial decisions they will ever make. Buying a home can help you build equity and eventually own an asset, while renting can provide flexibility and allow you to invest money elsewhere.
But there isn’t one answer that works for everyone.
Our Buy vs. Rent Calculator Canada is designed to help you compare the estimated financial impact of buying a home versus renting over several years.
Instead of looking only at a monthly mortgage payment or monthly rent, the calculator considers some of the other costs and assumptions that can affect the long-term picture.
Buy vs. Rent: Why the Decision Isn’t Simple
At first glance, the comparison seems easy.
For example:
- Mortgage payment: $3,000 per month
- Rent: $2,500 per month
It may appear that renting is automatically cheaper.
But homeowners may build equity as they pay down their mortgage. At the same time, homeowners also have expenses such as property taxes, insurance, maintenance and potentially condo fees.
Renters don’t normally have those homeowner expenses, but their rent can increase over time.
There is also another important question:
What could you do with the money you don’t spend on buying a home?
That money could potentially be invested.
That’s why comparing only the monthly payment isn’t enough.
How Does the Buy vs. Rent Calculator Work?
Our calculator lets you enter information about both the home you’re considering and the rental you’re comparing it with.
The calculator then estimates how the two scenarios could look over:
- 5 years
- 10 years
- 15 years
- 20 years
You can change the assumptions to see how different scenarios affect the result.
Information You Need for the Calculator
1. Home Price
Enter the approximate purchase price of the home.
For example:
$600,000
The calculator uses this amount to estimate your mortgage and potential future home value.
2. Down Payment
Enter the amount you expect to put toward the purchase.
For example:
$60,000
A larger down payment generally means a smaller mortgage, although the best down-payment strategy depends on your circumstances.
3. Mortgage Interest Rate
Enter the mortgage interest rate you want to use for the calculation.
For example:
4.5%
Keep in mind that actual mortgage rates can change when your mortgage is renewed or if you choose a different mortgage product.
4. Amortization Period
The calculator currently allows you to compare common amortization periods such as:
- 20 years
- 25 years
- 30 years
Your actual available amortization can depend on factors such as the mortgage, property and borrower.
5. Property Taxes
Property taxes are an important part of the cost of owning a home.
Enter your estimated annual property taxes.
For example:
$3,600 per year
That works out to approximately $300 per month.
6. Home Insurance
Homeowners also need insurance.
Enter your estimated monthly home insurance cost.
7. Maintenance
Homes require ongoing maintenance and repairs.
These can include:
- Furnace repairs
- Plumbing
- Roofing
- Appliances
- Landscaping
- Painting
- General repairs
Our calculator allows you to estimate maintenance as a percentage of the home’s value.
For example, if you use 1% for a $600,000 home, the estimated annual maintenance cost would be:
$6,000 per year
Actual maintenance expenses can be much higher or lower depending on the property and year.
What About Renting?
The calculator also asks for your rental information.
Monthly Rent
Enter the rent you currently pay or expect to pay.
For example:
$2,500 per month
Annual Rent Increase
Rent may increase over time.
You can enter an estimated annual rent increase, such as:
3% per year
This is only an assumption. Actual rent increases vary depending on location, property, market conditions and applicable provincial rules.
Renter’s Insurance
Enter your estimated monthly renter’s insurance cost.
This allows the calculator to make the comparison more realistic.
Why Home Appreciation Matters
One of the biggest differences between renting and owning is that homeowners own the property.
If the home’s value increases, the homeowner may build additional equity.
For example, suppose a $600,000 home appreciates by 3% per year.
After 20 years, the estimated value would be significantly higher than the original purchase price.
However, home prices don’t always increase at a consistent rate.
Property values can rise, fall or remain relatively flat for periods of time.
That’s why the calculator lets you change the assumed appreciation rate.
What Is Home Equity?
Home equity is generally the portion of the property you own after accounting for the remaining mortgage.
A simplified example:
Home value: $700,000
Remaining mortgage: $400,000
Estimated equity:
$300,000
As mortgage principal is paid down and/or the property value changes, your equity can change as well.
Equity can become an important part of a homeowner’s financial position.
Renting Has an Investment Opportunity
There’s another side of the comparison that is sometimes overlooked.
Suppose buying requires a $60,000 down payment.
A renter doesn’t have to use that $60,000 as a down payment.
If that money were invested instead, it could potentially grow over time.
Renters may also be able to invest money when their total monthly housing costs are lower than the estimated cost of owning.
Our calculator includes an expected investment return assumption to illustrate this concept.
For example, you might enter:
5% annual investment return
The calculator then models how the renter’s potential investment could grow over time.
However, investment returns are never guaranteed.
Buy vs. Rent Example
Let’s look at a simplified example.
Suppose you are considering:
Home price: $600,000
Down payment: $60,000
Mortgage rate: 4.5%
Monthly rent: $2,500
Home appreciation: 3% annually
Rent increase: 3% annually
Investment return: 5% annually
The calculator can then estimate the potential financial position at different points in time.
You can see:
| Period | Home Value | Mortgage Balance | Home Equity | Rent Paid | Renter Investment |
|---|---|---|---|---|---|
| 5 Years | Estimate | Estimate | Estimate | Estimate | Estimate |
| 10 Years | Estimate | Estimate | Estimate | Estimate | Estimate |
| 15 Years | Estimate | Estimate | Estimate | Estimate | Estimate |
| 20 Years | Estimate | Estimate | Estimate | Estimate | Estimate |
These numbers are not predictions. They simply demonstrate what could happen if the assumptions entered into the calculator were to occur.
Is Buying Always Better Than Renting?
No.
Buying a home can have advantages, but it also comes with significant costs and responsibilities.
Potential advantages of buying include:
- Building home equity
- Potential property appreciation
- Greater control over the property
- No landlord deciding whether to renew a lease
- Potential long-term housing stability
Potential disadvantages include:
- Large upfront costs
- Mortgage interest
- Property taxes
- Maintenance and repairs
- Insurance
- Possible transaction costs
- Less flexibility
- Property values can decline
Is Renting Always Better?
No.
Renting can be attractive because it may require less money upfront and can provide more flexibility.
Potential advantages include:
- Lower upfront costs
- Greater flexibility
- Less responsibility for major repairs
- Ability to move more easily
- Potential to invest money that would otherwise go toward a home purchase
But renting also has potential disadvantages.
Rent can increase over time, and renters don’t automatically build home equity through their monthly payments.
The financial outcome also depends on whether the renter actually invests the money they save.
The Most Important Question: What Can You Afford?
A calculator can help compare scenarios, but the first question shouldn’t necessarily be:
“Which option makes more money?”
A better starting question is:
“Which option can I comfortably afford?”
A home that looks attractive financially may still put too much pressure on your monthly budget.
Before buying, consider:
- Mortgage payment
- Property taxes
- Home insurance
- Utilities
- Maintenance
- Condo fees
- Closing costs
- Emergency savings
- Other debts
- Retirement savings
- Everyday living expenses
This is especially important when mortgage rates are higher.
Don’t Forget the Opportunity Cost
One of the most important concepts in a buy-versus-rent comparison is opportunity cost.
Money used for a down payment cannot simultaneously be invested somewhere else.
For example, putting $60,000 toward a home means that $60,000 isn’t sitting in an investment account.
That doesn’t mean buying is a bad decision.
It simply means that the real comparison involves more than mortgage payments versus rent.
You’re comparing different ways of using your money.
What About Closing Costs?
Buying a home can involve additional costs beyond the down payment.
Depending on the transaction and location, these may include:
- Legal fees
- Land transfer tax
- Home inspection
- Appraisal
- Title-related costs
- Moving expenses
- Other transaction costs
These expenses should be considered when deciding how much cash you need before buying.
Buy vs. Rent in Canada: There Is No Universal Answer
The right decision can depend on:
- Your income
- Your savings
- Your debt
- Your down payment
- Mortgage rates
- Local home prices
- Local rents
- Expected time in the home
- Expected rent increases
- Property taxes
- Maintenance costs
- Investment opportunities
- Your personal financial goals
Someone planning to stay in one home for 20 years may reach a very different conclusion from someone who expects to move within three years.
How to Use Our Buy vs. Rent Calculator
Start by entering your estimated home price and down payment.
Then enter your mortgage rate and amortization period.
Add your estimated property taxes, insurance, maintenance and condo fees.
Next, enter your current or expected rent, renter’s insurance and expected annual rent increase.
Finally, enter your assumptions for home appreciation and investment returns.
Click:
Calculate Buy vs. Rent
You’ll then see an estimated comparison over 5, 10, 15 and 20 years.
👉 Try the Buy vs. Rent Calculator Canada on MortgageSmartHub.
Frequently Asked Questions
Is buying a house cheaper than renting?
Not necessarily. The answer depends on the home price, rent, mortgage rate, taxes, maintenance, appreciation, investment returns and how long you stay in the property.
Is it better to rent or buy in Canada?
There is no universal answer. The best option depends on your financial situation, local housing market and long-term plans.
How many years should I stay in a home before buying makes sense?
There is no fixed number of years that applies to everyone. Buying and selling a home can involve significant transaction costs, so a longer ownership period can change the economics.
Does the calculator include mortgage interest?
Yes. The mortgage payment calculation uses the mortgage amount, interest rate and amortization period to estimate the mortgage payment and remaining balance.
Does the calculator guarantee whether I should buy or rent?
No. It provides an estimate based on the assumptions you enter. Actual results can be very different.
What investment return should I enter?
There is no guaranteed return. You can enter an assumption you believe is appropriate for your comparison, but remember that investment performance varies and can be negative.
Final Thoughts
The buy-versus-rent decision isn’t simply about comparing a mortgage payment with monthly rent.
Buying involves mortgage costs, taxes, insurance, maintenance and other expenses. Renting involves rent increases and potentially different opportunities for saving and investing.
The goal of a Buy vs. Rent Calculator isn’t to tell everyone that buying is better or that renting is better.
Instead, it gives you a way to explore the numbers.
Try different assumptions.
Change the home price.
Change the down payment.
Change the rent.
Change the mortgage rate.
Change the appreciation and investment assumptions.
Then see how the result changes.
The most useful answer isn’t necessarily “Buy” or “Rent.”
It’s understanding why the numbers change and choosing the option that fits your financial situation and long-term goals.
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Please do your own research and review the terms, conditions, pricing and suitability of any product or service before making a financial decision.
Calculator Disclaimer: This calculator provides estimates for educational and informational purposes only. Results are based on the assumptions entered and are not financial, mortgage, investment, tax, legal or real-estate advice. Actual mortgage rates, property taxes, insurance, maintenance costs, rent increases, home values, investment returns, fees and other expenses can vary significantly. Investment and home appreciation projections are hypothetical and are not guaranteed.