Rent vs buy in Canada: compare the decision, not just the monthly payment

A mortgage payment and a rent cheque are not equivalent. Part of the mortgage payment repays principal and builds equity; rent does not. A fairer comparison sets rent against the costs of owning that you never get back: property tax, maintenance, insurance, condo fees, mortgage interest and the return your down payment could have earned elsewhere.

This guide is for an owner-occupier deciding where to live. Akweno’s Canadian calculators model rental investments and do not perform a rent-versus-buy comparison.

For a $650,000 home with 20% down, assume $3,900 property tax, $6,500 maintenance (1% of value), about $23,400 first-year mortgage interest on $520,000 at 4.5%, and a $5,200 opportunity cost on the $130,000 down payment at 4%. Those unrecoverable costs total about $39,000 a year, or $3,250 a month, before insurance and any condo fees.

If a comparable home rents for less than that, renting may cost less year to year, before considering price growth. These assumptions are illustrative and change materially with rates, location and property type.

Buying and selling are expensive. Land transfer tax, legal fees and moving costs on purchase, plus real estate commission and legal costs on sale, are spread across the years you own. A short stay leaves less time to recover them, which is why a purchase that looks reasonable over ten years can look poor over three.

Change one assumption at a time: price growth, mortgage rate at renewal, rent increases and the return on invested savings. Renting only wins financially if the difference is actually invested, and owning only wins if you stay long enough and costs are realistic. Include a renewal at a higher rate before deciding.

Stability, flexibility, renovation freedom and the risk of concentrating savings in one home all matter. The financial comparison informs the decision; it does not make it. If you are instead thinking of buying a property to rent out, use the rental investment tools below.