Rent vs buy in Canada: which path builds more net worth?
Neither renting nor buying is better in general: the answer depends on how long the home is kept, how the rent compares with the price, and what the money not spent on owning earns. This rent vs buy calculator turns those three things into one comparison, net worth on each path at the end of every year.
Both paths spend exactly the same cash. The buyer puts the down payment and closing costs into the home, then pays the mortgage, property tax, maintenance and insurance. The renter invests that same up-front cash, pays rent and tenant insurance, and invests whatever is left over each month. In a month where owning costs less than renting, the owner invests the gap instead. That rule matters: a comparison where one side quietly spends less is a comparison of budgets, not of housing choices.
Official figures are not typed in by hand. Land transfer tax, first-time buyer relief, the CMHC mortgage insurance premium and the sales tax on it come from the same verified rule files as the land transfer tax calculator and the mortgage payment calculator. Everything else, including every growth rate and return, is an input with an example default. Each one is an assumption for the comparison, not a forecast.
How do you use this rent vs buy calculator?
- Enter the home price and down payment. Under 20% down, the insurance premium is added to the mortgage automatically.
- Enter the mortgage rate and amortization. Use a quoted rate; it is held for the whole comparison.
- Choose where the home is and whether the buyer is a first-time buyer. This sets the land transfer tax or registration fees and any first-time relief.
- Enter the rent for a comparable home. The comparison is only fair when the rented home is similar to the one being bought.
- Enter how many years the home would be kept. Selling costs are charged in that year.
- Set the investment return and home value growth. Then open “Costs of owning” and “Costs of renting and inflation” to replace the example property tax, maintenance, insurance, condo fee, closing cost, selling cost and rent growth figures with real ones for the home.
The result cards show the break-even year, net worth on each path at the end of the period and the unrecoverable costs. Below them are the year-by-year table, a bar chart of the two paths, a cost breakdown, a scenario table and the same purchase in every province and territory.
What does a worked example look like?
Take a first-time buyer in Ontario, outside Toronto, looking at a $600,000 home with $120,000 down, a mortgage at 4.5% over 25 years, and a comparable rental at $2,500 a month. The example assumptions are home value growth of 3%, an investment return of 5%, rent growth of 2.5%, property tax and maintenance of 1% of the home’s value each, home insurance of $1,500 a year, tenant insurance of $360 a year, other closing costs of $2,500, selling costs of 5% and a stay of 10 years.
| Step | Buying | Renting |
|---|---|---|
| Land transfer tax | $4,475 | none |
| Cash needed at the start | $126,975 | $126,975 invested |
| Monthly cost in year 1 | $3,782 | $2,530 |
| Invested each month in year 1 | none | $1,252 |
| Net worth at purchase | $90,000 | $126,975 |
| Home value after 10 years | $806,350 | not applicable |
| Mortgage owing after 10 years | $348,248 | none |
| Net worth after 10 years | $417,785 | $379,642 |
| Break-even year | year 6 |
With these example numbers buying is ahead by $38,143 after 10 years, and renting is ahead in each of the first five years. Sold after 3 years, the same home leaves the owner $17,836 behind. None of this is a prediction: it is what these particular assumptions produce.
What are the unrecoverable costs of renting and buying?
Unrecoverable costs are the payments that never turn into net worth, and both paths have them. Rent is the obvious one. The owner’s list is longer: mortgage interest, property tax, maintenance, insurance, land transfer tax, closing costs and the cost of selling. Mortgage principal is not on the list, because it becomes equity.
For the worked example over 10 years:
| Unrecoverable cost | Buying | Renting |
|---|---|---|
| Mortgage interest | $187,048 | |
| Property tax | $68,783 | |
| Maintenance and repairs | $68,783 | |
| Home insurance | $16,425 | |
| Land transfer tax and closing costs | $6,975 | |
| Selling costs in year 10 | $40,317 | |
| Rent | $336,101 | |
| Tenant insurance | $3,942 | |
| Total | $388,331 | $340,043 |
How to read this table: the owner in this example loses more money to unrecoverable costs than the renter, by $48,288. Buying still ends ahead because the home gained $206,350 in value while the renter’s portfolio earned $119,919. The home gain is larger because it is earned on the full price, not only on the down payment. That leverage works in both directions: a flat or falling home price leaves the owner with the costs and none of the offset.
How does the rent you pay change the break-even year?
The rent for a comparable home moves the break-even year by years, not months, because it sets how much the renter has left to invest. The price-to-rent ratio, the price divided by a year of rent, is a quick way to read it. The table holds everything in the worked example steady and changes only the rent.
| Monthly rent | Price-to-rent ratio | Break-even year | Buying minus renting after 10 years |
|---|---|---|---|
| $2,000 | 25.0 | not within 40 years | −$47,473 |
| $2,250 | 22.2 | year 12 | −$4,665 |
| $2,500 | 20.0 | year 6 | +$38,143 |
| $2,750 | 18.2 | year 4 | +$80,951 |
| $3,000 | 16.7 | year 3 | +$123,759 |
A 10% difference in rent moves the break-even from year 6 to year 12 here. That is why the rent entered has to be for a home that is really comparable. Comparing a detached house with the rent on a one-bedroom apartment answers a different question. In Ontario, the Ontario rent increase calculator shows what the provincial guideline allows on a rent-controlled unit, which is a reasonable starting point for the rent growth input.
Which assumptions move the result most?
Home value growth, the investment return and the mortgage rate move the result as much as the rent does. One point of change in any of them can flip which path is ahead. In the worked example:
| Change to one assumption | Break-even year | Buying minus renting after 10 years |
|---|---|---|
| Home value growth 2% instead of 3% | year 18 | −$25,876 |
| Home value growth 4% | year 3 | +$108,289 |
| Investment return 4% instead of 5% | year 5 | +$65,981 |
| Investment return 6% | year 9 | +$8,085 |
| Mortgage rate 5.5% instead of 4.5% | year 15 | −$15,808 |
| Mortgage rate 3.5% | year 4 | +$90,740 |
The spread is the point. A range from −$25,876 to +$108,289 from one point of home value growth says the comparison cannot be settled to the dollar. The calculator’s scenario table repeats this for any set of inputs, so the useful question becomes which assumptions the result survives.
How do land transfer tax and mortgage insurance change the comparison?
Land transfer tax and mortgage insurance raise the cost of getting into a home, which pushes the break-even year later. They are the two official inputs in the comparison, and both depend on facts the buyer can look up.
Land transfer tax depends on the province and, in Ontario, Toronto, British Columbia and Prince Edward Island, on first-time buyer status. On the worked example’s $600,000 home, a first-time buyer pays nothing in Prince Edward Island and $9,650 in Manitoba. A repeat buyer in Toronto pays both the Ontario and the municipal tax, and the break-even moves from year 6 to year 8. The calculator’s last table runs the same purchase in every province and territory.
Mortgage default insurance applies when the down payment is under 20%. CMHC charges a one-time premium as a share of the loan:
How to read this table: find the row whose loan-to-value covers the loan divided by the price. The first three rows are for insurance on a mortgage with 20% or more down, which this calculator does not charge. The last row applies only when the down payment is borrowed.
| Loan-to-value up to | Premium (share of the loan) |
|---|---|
| 65% | 0.6% |
| 75% | 1.7% |
| 80% | 2.4% |
| 85% | 2.8% |
| 90% | 3.1% |
| 95% | 4% |
| 95% | 4.5% |
Source: Mortgage loan insurance premiums (homeowner and small rental loans) — CMHC; Mortgage loan insurance premiums — CMHC (portability surcharge and provincial sales tax); Mortgage loan insurance premiums — CMHC (Refinance schedule note); CMHC Mortgage Loan Insurance cost (consumer page) — CMHC; CMHC Purchase — product page (25-year maximum amortization, premium schedule); CMHC Home Start — product page (30-year amortization premium schedule); CMHC Home Start — eligibility (first-time buyer or newly built; high-ratio only); CMHC Revises Homeowner Mortgage Loan Insurance Premiums (notice, June 5, 2024); Boldest mortgage reforms in decades come into force today (December 15, 2024). In effect from December 15, 2024; checked September 29, 2026.
On a $500,000 home with $25,000 down, the premium is $19,000, added to the mortgage, and Ontario charges $1,520 of sales tax on it in cash. Quebec and Saskatchewan tax the premium too, at their own rates, and the calculator flags a rate change that is already scheduled. Against a $2,300 rent with the other example assumptions, the break-even is year 7. The smaller down payment also means the renter starts with only $31,495 to invest. The mortgage affordability calculator checks whether a lender would approve the mortgage in the first place, which this comparison does not test.
How does the maths work?
The calculator follows the cash, month by month, for up to 40 years:
- Closing. Cash needed is the down payment, the land transfer tax or registration fees after relief, sales tax on any insurance premium and other closing costs. The renter invests the same amount on day one.
- Mortgage. The payment uses semi-annual compounding, the Canadian fixed-rate convention, on the loan plus any CMHC premium. Each payment is split into interest (unrecoverable) and principal (equity).
- Running costs. Property tax and maintenance are a share of the home’s value at the start of each year. Insurance and condo fees rise with the cost inflation input. Rent rises with the rent growth input once a year.
- Investing the difference. Each month the two totals are compared. The path that costs less invests the gap, and both portfolios grow at the monthly equivalent of the return entered.
- Net worth. At each year end the owner’s net worth is the home’s value, minus selling costs, minus the mortgage owing, plus any savings invested. The renter’s net worth is the portfolio.
- Break-even. The first year the owner’s figure is at least the renter’s, compared in whole dollars. If renting moves back ahead in a later year, the result names that year too.
A built-in check keeps the two paths honest: on each path, net worth always equals the cash put in, minus unrecoverable costs, plus growth. The tests behind the calculator verify that identity for every year.
What are the most common mistakes in a rent vs buy comparison?
- Comparing the mortgage payment with the rent. The payment leaves out property tax, maintenance, insurance and the money tied up in the down payment.
- Ignoring the cost of getting in and out. Land transfer tax, legal fees and real estate commission are why short stays favour renting.
- Treating rent as the only money lost. Mortgage interest in the first years is usually larger than the principal repaid.
- Assuming the renter invests the difference without checking. If the monthly gap is spent, the renting path in this comparison does not exist. A renter saving for a first home can use an FHSA, with $8,000 of room in the year it is opened and a lifetime limit of $40,000; the FHSA explained guide covers the rules.
- Using one optimistic number for home growth or returns. The scenario table exists because a single point estimate hides the range.
- Comparing different homes. A larger owned home against a smaller rental measures the cost of extra space, not the cost of owning.
- Forgetting fees on the investment side. The return entered is after fees; the investment fee calculator shows how much a high-fee fund takes over the same period.
When is it worth talking to a professional?
A mortgage broker or lender can confirm the rate, the amortization available and whether the mortgage would be approved. A real estate lawyer can quote the actual closing costs, and a fee-only financial planner can look at the whole picture, including taxes on investments held outside registered accounts, a rental suite, or a purchase with family members. This calculator is an educational estimate, not financial, tax or mortgage advice, and its growth and return inputs are assumptions rather than forecasts. Lender documents, the municipal property tax bill and a written rent quote are the figures to rely on.