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Should you buy or rent? Our guide breaks down the cost of homeownership vs. renting.
Wondering whether you should rent or buy? Buying your own home is often viewed as a major financial milestone. But the financial case for owning a home isn’t as simple as ‘mortgage payment versus rent.’
Homeownership can build equity and provide long-term housing stability, but elevated home prices and borrowing costs put it out of reach for some. And while renting avoids the upfront cost of buying and can preserve more cash for savings and investments, high rents can make it harder to get ahead financially.
There’s no universal winner in the rent-versus-buy debate. The answer depends on the full cost of buying, what you can comfortably afford, what else you could do with your money and how long you expect to stay in the home.
For Tina Tehranchian, a Senior Wealth Advisor at CI Assante Wealth Management Ltd., that broader view is essential.
“The objective of the financial plan should not be simply to find out if you can afford the house, but it should be to find out if you can afford the house and still achieve your other financial goals,” she said in an interview held for MoneySense.
The starting point is affordability — not what a lender says you can borrow, but what you can comfortably carry.
A mortgage pre-approval tells you how much a lender is willing to finance. It doesn’t necessarily tell you how much home you can realistically afford.
“Approval is a ceiling, not a target,” said Canadian mortgage professional Tracy Valko in an interview with MoneySense.
Lenders assess whether you can service a mortgage based on your income, debts, and other financial obligations. But they aren’t looking at your entire household budget, and they don’t know how much you want to save for retirement or how much flexibility you need for everything else in your life.
Consider working out affordability from the other direction: start with the housing payment you can realistically carry while continuing to save and meet your other financial commitments, then work backwards to determine what that supports in terms of home price.
Valko, Founder of Valko Financial Ltd. in Kitchener, Ont., suggests testing that number before making an offer.
For example, if your projected carrying costs would be $1,000 more a month than your current rent, put that $1,000 into a separate account for three months. If you can do that without disrupting the rest of your budget, you’ve got some evidence that the higher cost is manageable. If it hurts, you’ve found your limit before buying, rather than after.
Housing costs vary dramatically by market. In the second quarter of 2026, the average asking rent for a two-bedroom apartment was $3,030 a month in Vancouver, $2,650 in Toronto and $1,890 in Calgary, according to Statistics Canada.
The amount you can comfortably spend also depends on how much cash you’ll have left after closing. A buyer who puts every available dollar into the down payment may have a manageable mortgage but little financial resilience when the first major repair or unexpected expense arrives.
“Less than three months of cushion isn’t a reason to find a more creative lender,” notes Valko. “It’s a reason to buy less house.”
The down payment is only the beginning. Depending on the property and location, buyers may also face land transfer tax, legal fees, title insurance, an inspection, appraisal, condo or strata document fees, moving costs and adjustments for expenses the seller has prepaid.
The Financial Consumer Agency of Canada (FCAC) recommends budgeting 1.5% to 4% of the purchase price for closing costs, although the actual amount varies depending on the property and location.
Buyers putting less than 20% down generally need mortgage default insurance. The minimum down payment is 5% on the first $500,000 of a home’s purchase price and 10% on the portion between $500,000 and $1.5 million. Homes priced at $1.5 million or more require at least 20% down. While the insurance premium can be added to the mortgage, applicable provincial sales tax on the premium must be paid at closing.
Valko recommends budgeting 2% to 4% of the purchase price for closing costs (in Ontario), as well as 1% to 2% of the home’s value per year for maintenance.
“Never compare rent to a mortgage payment,” she says. “Compare it to the full carrying cost: principal, interest, property taxes, insurance, condo fees, and every utility your landlord used to absorb.”
One important distinction: part of your mortgage payment goes toward the cost of borrowing, while the rest goes toward owning more of the home. That money builds equity, but it’s also tied up in the property rather than available for other uses.
For example, a buyer putting $60,000 down on a $600,000 home would need a $540,000 mortgage before mortgage insurance. At a 4.01% five-year fixed rate and 25-year amortization, the monthly mortgage payment would be about $2,932, assuming the insurance premium is added to the mortgage.
If buying requires you to liquidate investments or substantially reduce your other savings, you may be giving up some diversification and financial flexibility to become a homeowner.
“If liquidating most of your portfolio for a down payment and you can barely save for retirement, you may become overly concentrated in real estate, lack liquid assets and compromise your goals,” says Tehranchian.
The same consideration applies to your monthly cash flow. If renting a comparable home costs less than owning, the difference could potentially be saved or invested. But that only strengthens the financial case for renting if you actually invest the difference rather than spend it elsewhere.
Consider a buyer putting $60,000 toward a $600,000 home. That money is no longer available to invest elsewhere. At a hypothetical 5% annual return, $60,000 invested for 10 years would grow to about $97,700 before taxes and fees.
“Significant reduction/suspension of retirement savings can be more expensive due to lost compound growth,” says Tehranchian. “The best approach is to model both scenarios rather than trying to predict whether home prices or investment markets will outperform over the next few years.”
Then stress-test the assumptions. Higher mortgage rates at renewal, slower home-price growth or lower investment returns can materially change which option comes out ahead.
How long you expect to stay matters, too. Even if you are sure you will be there for a long time, it is worth considering how the numbers would look if you needed to sell sooner than planned.
Buying and selling both carry significant transaction costs. If you end up selling sooner than planned, there may not be enough time for the equity you build and any home-price growth to outweigh those costs.
“A home is the only major purchase where the exit costs more than the entry,” Valko told MoneySense.
Just as buying comes with many additional costs, selling can involve real estate commission, legal fees, mortgage discharge fees and, if you break your mortgage before the end of its term, a prepayment penalty. Realtor commissions are negotiable and typically range from 2% to 6%, depending on the location.
Your circumstances can determine how much weight to give that risk. If you’re likely to relocate for work, expect a significant change in household size or aren’t sure where you’ll want to live in a few years, the flexibility of renting may hold greater value for you.
There isn’t a universal break-even point for buying versus renting. Run the numbers over the period you expect to stay, but also see what happens if you have to sell sooner.
Before deciding, run the numbers for both options. For buying, account for:
For renting, include your rent and expected increases, along with the amount you could potentially keep invested instead.
Our calculator will help you understand what a mortgage will cost you in real terms while factoring for interest rates, amortization period, fixed or variable terms, and more.
Then consider these questions:
Can I afford the home without stretching my budget?
A mortgage payment you can technically qualify for isn’t necessarily one you can comfortably carry while continuing to save and deal with unexpected expenses.
What am I giving up in order to buy a home?
Consider the investment returns, retirement savings and financial flexibility you may sacrifice by putting more of your money into the property.
How long am I likely to stay?
The longer you own, the more time you have to absorb the costs of buying and selling and build equity. If your circumstances make a shorter stay more likely, renting may offer you valuable flexibility.
Will buying still work if my assumptions are wrong?
Test the numbers with higher mortgage rates, slower home-price growth or lower investment returns. A purchase that only works under optimistic assumptions leaves little room for error.
Want to run the numbers yourself?
A mortgage payment calculator to estimate your monthly borrowing cost and an affordability calculator to see what purchase price fits your income and debts. Use Ratehub’s mortgage payment and mortgage affordability calculators to help you build the buying side of the comparison.
It depends on the market, property and how long you stay. Renting can be cheaper once you account for the full cost of owning, while buying can make more financial sense over a longer period as you build equity. Compare the full costs of both options, including what you could invest if you rent instead of buy.
You need at least 5% of the first $500,000, plus 10% of the portion between $500,000 and $1.5 million. Homes priced at $1.5 million or more require at least 20% down. A down payment below 20% generally requires mortgage default insurance.
Beyond the mortgage, homeowners may pay property taxes, home insurance, utilities, maintenance and repairs, plus condo or strata fees where applicable. These costs should be included when comparing the cost of owning versus renting.
There’s no universal break-even point. The longer you stay, the more time you have to spread out the costs of buying and selling and build equity. If you might need to move within a few years, renting can make more financial sense because you avoid those transaction costs.
Consider what that money could earn if it remained invested. Compare the potential investment growth with the equity you would build by buying, while accounting for the costs and risks of each option.
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