Rent vs Buy in Canada: How to Actually Run the Numbers

Why "rent is throwing money away" is the wrong frame

Rent buys you housing for a month, full stop. A mortgage payment buys you housing for a month too — the equity-building part only shows up later, when you sell, and only if the property has actually appreciated enough to clear your costs. In between, ownership carries expenses renters simply don't have.

So the real question isn't "equity vs. nothing." It's: does the money tied up in a down payment, plus the extra costs of owning, grow into more wealth than that same money would generate if you rented and invested the difference instead? That's a math question, not a moral one.

The full cost of owning (it's more than the mortgage)

A mortgage payment is the headline number, but it's not the whole cost of owning. To compare fairly, you need to add:

• Property taxes, which vary by municipality and are billed annually or monthly
• Home insurance, which renters also pay for but at a much lower level (tenant insurance vs. homeowner insurance)
• Maintenance and repairs — a common industry rule of thumb is to budget roughly 1% of the home's value per year, though this varies a lot by property age and type
• Condo fees, if applicable, which can run into the hundreds of dollars monthly
• Mortgage default insurance if your down payment is under 20% of the purchase price, a standard requirement in Canada
• Closing costs and land transfer tax when you buy, and realtor commission and legal fees when you eventually sell

On top of that, if interest rates rise when it's time to renew your mortgage, your payment can increase even though your loan balance didn't change. The Bank of Canada's policy rate is the biggest driver of that risk, and it moves on its own schedule, not yours.

The other half of the equation: renting and investing the gap

Renting isn't automatically the frugal choice — it's only the financially efficient choice if you actually invest what you save. If owning would cost you noticeably more per month than renting an equivalent place, the fair comparison assumes you take that monthly difference, plus the down payment you didn't spend, and put it into a diversified investment account, ideally a TFSA or RRSP where the growth is sheltered from tax.

This is where a lot of rent-vs-buy debates go wrong: people compare a homeowner's equity 10 years from now to a renter's bank balance today, ignoring that the renter had a decade to invest. Run both sides forward with realistic, modest growth assumptions before you conclude either path wins.

A simple way to run your own numbers

You don't need a spreadsheet degree to do this reasonably well. Start with your expected time horizon — how many years you'd realistically stay in the home — because short horizons almost always favour renting once you account for buying and selling costs.

Then estimate two monthly totals: all-in cost of owning (mortgage, taxes, insurance, maintenance, condo fees if any) versus all-in cost of renting a comparable place. Take the difference and project what it would grow to if invested over your time horizon, using a compound interest or TFSA growth calculator to see the effect of steady contributions.

Finally, compare that projected investment value against your realistic equity gain from owning: your down payment plus principal paid down, adjusted for a conservative estimate of home price appreciation, minus the costs of selling. Neither number is a guarantee — it's a way to see which scenario is more likely to leave you ahead given your specific market and situation.

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