Rent vs. Buy Calculator

The method behind the comparison

The buyer pays a down payment and closing costs upfront, then each month pays the mortgage plus property tax and maintenance. The renter pays rent and invests the money the buyer spent upfront. Each month, whichever path is cheaper invests the difference at your chosen return. At the end of the horizon, the buyer's net worth is the home's value minus the remaining mortgage and a 5% allowance for selling costs (realtor commission, legal fees), plus any invested savings. The renter's net worth is their investment portfolio.

Mortgage payments use a 25-year amortization with Canadian semi-annual compounding, and mortgage default insurance is added automatically when the down payment is under 20%. Because a principal residence is generally exempt from capital gains tax in Canada, home appreciation is not taxed here; investment returns are shown before tax, which favours renting slightly unless the renter invests through a TFSA or RRSP.

The 5% rule, briefly

The 5% rule is a quick way to compare without a spreadsheet. The unrecoverable costs of owning — money you never get back — are roughly property tax (about 1%), maintenance (about 1%), and the cost of capital (about 3%, reflecting mortgage interest and the return your down payment could have earned elsewhere). Multiply the home price by 5% and divide by 12. If comparable rent is below that number, renting is likely the better financial deal. The panel above uses your own tax and maintenance inputs plus a 3% cost of capital.

Which assumptions matter most

Home price growth and investment return dominate the outcome over long horizons, so test a few combinations rather than relying on one. Short horizons usually favour renting because buying and selling costs have little time to be offset. And the comparison only holds if the renter actually invests the difference — a mortgage is a form of forced saving that many people find easier to stick with. To understand how much of each payment builds equity, see Understanding Mortgage Amortization.

Frequently asked questions

What maintenance percentage should I use? 1% of the home's value per year is a common rule of thumb; older detached homes often need more, while newer condos need less (but carry condo fees, which you can fold into the maintenance figure).

Does this include home insurance? Renters and owners both pay insurance, though owners pay more. Add the difference to the maintenance percentage for a more precise result.

What about land transfer tax? It is part of the 1.5% closing-cost assumption. In cities with an additional municipal tax, such as Toronto, closing costs can be meaningfully higher.