Part 0620 min

Renting or buying: compare the whole housing cost

Start with the rent or mortgage payment, then add the cash needed before the keys, the costs that follow, the risks you carry and the money each choice leaves for your next goal.

ExampleOntario · age 28 · $65,000 a year · take-home $4,195 a monthChange

1The housing decision
Renting and buying are two ways to pay for a home
You need somewhere to live, and it has to fit the money that survived payroll, the bills and the rest of Part 3.
You can rent a home from somebody else or buy one yourself. Renting is a monthly payment for a place to live. Buying is a pile of cash up front, a very large loan, interest, repairs, and an asset that may be worth hundreds of thousands of dollars.
Housing is the bill that can crowd out every other goal, so the comparison starts with what leaves your account each month. Your banking setup from Part 2 is where that money moves through.
RentPay the owner for the right to live there.More flexibility, less responsibility for the building.
BuyUse your cash and a mortgage to own the home.More control and equity, plus more costs and risk.
2Start with renting
Rent buys a home and flexibility at a monthly price
Say you rent for $2,500 a month. That pays for the home this month and leaves the big risks with the landlord: the roof, the furnace, a drop in the building's value.
You may also pay electricity, heat, water, parking, internet and tenant insurance. Your housing cost is the rent plus whatever the lease puts on you. Each province sets its own rules on deposits, rent increases and who fixes what.
Monthly rent$2,500
Annual rent increase used in this example2.50%
Rent paid over 5 years
$157,690
Monthly rent in year 5
$2,760
Share of your take-home pay
60%
$30,000
Year 1
$30,750
Year 2
$31,519
Year 3
$32,307
Year 4
$33,114
Year 5

The increase is a teaching assumption. Your lease, province, territory, property type and rental market determine what happens in real life.
3Cash before the keys
The down payment sets the size of the loan
Buying starts with the price. A $600,000 home does not need $600,000 in your account. You put in a down payment and borrow the rest with a mortgage.
The federal minimum is 5% of the first $500,000 and 10% of the rest. On a $600,000 home that is $35,000. On a $600,000 home it is $35,000.
Home price$600,000
Down payment share10%
Down payment · $60,000
Mortgage before insurance · $540,000
Insurance premium · $16,740
Minimum required in this example
$35,000
Your down payment
$60,000
Cash still needed for closing
Separate
The bar keeps your down payment at or above the federal minimum. The purchase also needs closing costs, moving costs, inspections, legal work, adjustments and cash left for emergencies.
4Money needed to close
Closing costs arrive beside the down payment
The down payment is not all the cash you need. Buying also brings legal fees, title insurance, a home inspection, an appraisal, a land-transfer tax in most provinces, property-tax adjustments and moving costs.
On a $600,000 home, plan for 1.5% to 4%, so $9,000 to $24,000, until you have local quotes.
Good to know: transfer taxes by province
Ontario, British Columbia and Quebec charge a land-transfer tax that grows with the price, and Toronto adds a second municipal one. Alberta and Saskatchewan charge flat registration fees instead, which is why closing costs there are much lower. First-time buyers get rebates in several provinces.
City or municipality
Other closing costs planning rate2.50%
Ontario plus Toronto
$23,475illustrative cash before the down payment
Land transfer tax$8,475Legal work, inspection, appraisal, adjustments and other costs$15,000
The second line uses a planning range, not a quote. Transfer taxes and rebates vary by province, municipality, property type and buyer status. Ask for a local statement of adjustments before you commit.
5Below 20% down
Mortgage default insurance protects the lender, not your furniture
With less than 20% down you need . The , or CMHC, is the best-known provider; two private companies offer it too.
It protects the lender if you stop paying, not you or your belongings. The premium depends on how small your down payment is, and it is usually added to the mortgage, so you pay interest on it for 25 years. Ontario, Quebec and Saskatchewan also charge sales tax on the premium, and that part is due in cash at closing.
Mortgage loan insurance is normally required.
$16,740estimated premium on the $540,000 mortgage$1,339 provincial sales tax is paid in cash in this province.
Loan-to-value
90%
Maximum insured amortization here
30 years
Protects
Lender
Mortgage loan insurance protects the lender if the borrower cannot repay. It is different from home insurance, which covers the property under its policy. If the premium is added to the mortgage, interest is charged on it too.
What do you think happens?
A buyer puts 10% down and pays about $19,000 of mortgage default insurance. Who does that insurance protect?
6The asset and the debt
Home equity is what is left after the mortgage
A is a loan with the home as security. The lender pays the seller, you pay the lender back over decades, and if you stop, the lender can take the home.
The home's value and the mortgage balance are two separate numbers. The gap between them is your equity. A $600,000 home with a $500,000 mortgage means about $100,000 of equity. Prices can fall, so equity can shrink even when every payment was made.
Current home value$600,000
Mortgage balance$500,000
Mortgage balance · $500,000Home value · $600,000
$100,000.
Paying principal lowers the balance. A change in market value changes equity independently. If the balance is larger than the home value, you have negative equity.
7Read the payment
A mortgage payment is mostly interest at first
Every mortgage payment is two things at once. lowers what you owe. is what the lender charges.
If a $2,900 payment is $1,900 of interest and $1,000 of principal, all $2,900 leaves your account but only $1,000 builds equity. Comparing rent with a mortgage payment misses this: in the early years most of the payment is rent paid to the bank.
Mortgage interest rate4.50%
Monthly mortgage payment
$3,081
First month's interest
$2,068
First month's principal
$1,013
Interest over the schedule
$367,682
$36,977
Year 1
$36,977
Year 5
$36,977
Year 10
$36,977
Year 15
$36,977
Year 20
$36,977
Year 25

Principal reduces the balance
Interest pays the lender
The example uses a 25-year amortization and monthly payments. It is an estimate built from your selected home, down payment and rate, not a pre-approval.
8The Canadian mortgage clock
Your term ends long before your mortgage does
Canadian mortgages have two clocks. The is how long your current rate and contract last, usually five years or less. The is how long until the loan is fully paid, usually 25 years.
A five-year fixed mortgage with a 25-year amortization is not paid off in five years. At the end of the term you renew what is left at whatever rates are then. That renewal is where payment shocks happen.
A longer amortization lowers the monthly payment and raises the total interest, because the bank's money is out longer.
StartSame schedule
Year 5Renew
Year 10Same schedule
Year 15Same schedule
Year 20Same schedule
Year 25Paid off
Amortization
25 years
Current term
5 years
Balance at year 5
$488,798
The amortization is the planned time to repay the loan. The term is the current contract. At renewal, the remaining balance gets a new contract and usually a new rate. A 30-year insured amortization has eligibility rules, including first-time buyers or new builds.
9Choose the rate structure
Fixed and variable rates move for different reasons
A keeps the same rate and payment for the whole term. A can move during the term.
Variable rates follow the lender's , which moves with the Bank of Canada. Fixed rates follow the bond market. The two do not always move together.
Good to know: the trigger rate
Some variable mortgages keep the payment fixed and quietly shift more of it to interest when rates rise. If rates rise far enough that the payment no longer covers the interest, you hit the trigger rate and the lender will ask for a higher payment or a lump sum.
Rate used here4.50%Fixed for the term
Monthly payment$3,081Payment recalculates at this rate
$2,068 interest · $1,013 principal in the first payment
A lender sets its own prime rate, which is influenced by the Bank of Canada's policy rate. Fixed mortgage rates are priced through other market forces, including government bond yields. A variable payment can change, or a fixed payment can send more of each dollar to interest.
10The lender's limit versus yours
The bank's maximum is not your home budget
Before lending you hundreds of thousands of dollars, a lender checks your income, your job, your other debts, your down payment, your credit file and the property.
Two ratios do most of the work. , or GDS, compares housing costs with gross income; the usual cap is 39%. , or TDS, adds your other debt payments; the usual cap is 44%.
The lender's maximum tells you what they will lend. It knows nothing about the family you send money to, the trip you want to take, or the cushion you want to keep. Your budget is a smaller number than their maximum.
Household gross annual income$65,000
Other monthly debt payments$500
Monthly property tax$400
Monthly heating$150
Monthly condo or strata fees$0
Your comfortable monthly housing budget$2,800
Lender's qualification lensAbove this illustration's ratios$1,333 estimated mortgage-payment room after the listed costs
Your budget lens$2,800 chosen monthly housing budgetNeeds a cheaper home, more income or less debt
Gross Debt Service
67%
Total Debt Service
76.3%
Guidelines used
39% / 44%
Gross Debt Service, often shortened to GDS, counts certain housing costs. Total Debt Service, or TDS, adds other debt payments. The ratios are underwriting tools. They do not know your travel plans, family support, retirement target or preferred buffer.
11The higher rate on the application
The stress test asks whether the loan survives a higher rate
Federally regulated lenders also run a . They check whether you could still pay at the higher of 5.25% or your contract rate plus 2 points.
Offered 4%? The lender tests you at 6%. You pay 4%; the test just asks whether a bad renewal would break you. It is why the amount you qualify for is smaller than the payment alone suggests.
Mortgage contract rate4.50%
What you pay at the contract rate$3,081
What the lender tests$3,729
Contract rate
4.50%
Qualifying rate
6.50%
Extra payment used for the test
$648
Federally regulated lenders generally use the higher of 5.25% or your contract rate plus 2 percentage points for the stress test. You do not pay the qualifying rate. It tests whether the application survives a higher one.
12The rest of the monthly bill
The mortgage payment is not the whole cost of owning
After closing, the mortgage gets all the attention. It is one line of the bill.
Owners also pay property taxes, home insurance, heat, electricity, water, maintenance, repairs and, in a condo, monthly fees. A renter pays some of the same utilities and insurance, so compare like with like and mark who pays each line.
Build a complete monthly homeowner costTry it
Annual property taxes$4,800 / year
Annual home insurance$1,800 / year
Annual maintenance budget$6,000 / year
Monthly condo or strata fees$0
Monthly owner-paid utilities$150
Mortgage payment
$3,081
Other owner costs
$1,200
Total owner cash flow
$4,281
Illustrative rent
$2,500
The mortgage payment still contains both interest and principal. The other lines are ongoing costs. A renter may pay some utilities or insurance too, so compare the difference between equivalent homes.
13When the building is shared
In a condo, the building's budget is your budget
Condo or strata fees pay your share of the building: hallways, elevators, the roof, the reserve fund for big future repairs. They cover a lot, and they do not cover everything.
When a building needs a repair its reserve fund cannot pay for, every owner gets a bill. That is a special assessment, and it can run to tens of thousands of dollars. A suspiciously low monthly fee often means an underfunded reserve. Read the financial statements and the reserve-fund study before you offer.
Detached or townhome. You carry more of the building's repair responsibility directly, so the maintenance line deserves a larger and more property-specific budget.
Condo or strata fees may pay for shared maintenance, insurance, utilities and a reserve fund. They do not replace unit insurance, property tax, mortgage payments or every repair inside your unit.
14The money you do not see
The down payment has a cost even after it becomes equity
Say buying uses a $100,000 down payment. If you kept renting, that money could stay invested. The return you give up by locking it into a home is the of buying.
Buying also means : you control a $500,000 asset with $100,000 of your own money. A 10% price rise is $50,000, half your down payment, before costs. A 10% fall takes the same $50,000 away.
Money used as the down payment$100,000
Illustrative investment return5.00%
Illustrative home appreciation3.00%

Down payment invested after 10 years
$162,889
Illustrative home equity after 10 years
$443,592
The return and appreciation are assumptions, not promises. makes the down payment part of the comparison even though the money becomes home equity.
15The flagship comparison
Compare the whole path, not two monthly payments
The honest comparison tracks two things. Cash flow: how much leaves your account each month and over the whole stay. Net worth: what the owner builds through principal and price changes, against what the renter builds by keeping the down payment invested.
It counts rent increases, mortgage interest, property taxes, insurance, maintenance, condo fees, closing costs, selling costs and the money tied up in the down payment. A lower mortgage payment does not make buying cheaper, and a lower monthly rent does not make renting the better path. Run it with your numbers.
Five starting assumptions
Change the life you are comparing
10 years
Monthly rent$2,500
Home price$600,000
Down payment10%
Mortgage rate4.50%
Years you expect to stay10 years
This projection
Under these assumptions, the buyer finishes with more projected net worth.Projected buyer break-even year: 8.
Cumulative cash spent

Renter cash spent
Buyer cash spent
Cash flow includes the down payment for the buyer. It shows money leaving, not what the home may be worth later.
Projected net worth

Renter net worth
Buyer net worth
Net worth gives the buyer credit for home equity after estimated selling costs and gives the renter credit for invested capital under the selected assumptions.
Renter net worth in year 10
$348,568
Buyer net worth in year 10
$368,572
Buyer cash spent in the period
$598,933
Renter cash spent in the period
$352,001
Mortgage insurance is likely required because the down payment is below 20%. Verify with CMHC, Sagen, Canada Guaranty, or your lender.
Rent growth can be affected by provincial rules, property type, turnover, and market conditions.
Every rate, return, appreciation, rent-growth, tax, fee and cost here is an assumption. The projection helps you see which inputs matter. It cannot declare a universal winner.
16Connect the earlier accounts lesson
First-time buyers can pull the down payment from registered accounts
The First Home Savings Account, or FHSA, from Part 4 was built for this moment. Contributions reduced your taxable income on the way in, and the withdrawal for a first home is tax-free.
The lets you borrow up to $60,000 from your own for the same purpose, repaid over 15 years. You can use both on the same home. Provincial first-time-buyer rebates are a separate check.
First Home Savings Account balance$16,000
Registered Retirement Savings Plan balance$40,000
First Home Savings Account$16,000Potential qualifying withdrawal from the balance shown
Home Buyers’ Plan$40,000Up to $60,000 from an eligible Registered Retirement Savings Plan
A First Home Savings Account can provide contribution deductions and a qualifying tax-free home withdrawal. The Home Buyers’ Plan can allow up to $60,000 from a Registered Retirement Savings Plan, with repayment rules. Eligible buyers may use both for the same home. The home buyers’ amount and provincial or municipal programs are separate checks.
17For newcomers
A down payment is only one part of a newcomer mortgage file
If you are a newcomer, cash alone does not get a mortgage. The lender still wants proof the income is steady and the debts are manageable, and a short Canadian credit file leaves holes in the application.
Some lenders and insurers have newcomer programs that accept employment letters, immigration documents, foreign credit reports and references instead. The Canadian file still matters more every year, which is why the credit lesson belongs in a home plan.
Explore the evidence a newcomer may bring to a mortgage applicationTry it
Newcomer application
Cash is only one part of the file.
Employment and income records
Immigration or residency documents
International credit information or references where the lender and insurer allow it
A short Canadian credit history does not produce an automatic approval or refusal. Lenders still assess income, debts, down payment, property and status. Building Canadian credit early connects this lesson to the credit history lesson.
18When you leave
Selling costs money, even when the home gained value
A home can grow in value. It can also stay flat or fall. And even when it grows, buy at $600,000, sell at $650,000, and the $50,000 is not your profit.
Along the way you paid interest, property taxes, insurance, repairs, and the costs of buying and selling. The longer you stay, the more years those costs spread over. Sell after two years and they can eat the whole gain.
Good to know: tax on the sale
A home you lived in usually qualifies for the principal residence exemption, so the gain is tax-free, but you still report the sale on your return. Renting out part of it, changing its use, living abroad for a stretch, or selling within a year of buying can make some of the gain taxable.
Original purchase price$600,000
Sale price$700,000
Selling-cost rate used in the illustration4.00%
Price difference
$100,000
Illustrative selling costs
$28,000
Price difference after selling costs
$72,000
A qualifying principal residence can generally shelter the gain from Canadian capital-gains tax, but the sale still has to be reported and designated on the tax return.
The is a tax rule, not a promise that selling is free. Brokerage, legal, mortgage discharge, moving and possible prepayment costs still affect the result.
19The trade-off
Renting buys flexibility; owning changes which risks you carry
Renting builds no equity. It does keep you mobile and keeps your money spread across more than one asset. You never pay for the roof, and you can move across the country without selling anything.
Owning builds equity through principal and price growth. It also ties most of your money to one address and puts repairs, renewals and selling costs on you. Neither choice makes you a success or a failure. They spread the risk differently.
Renting keepsFlexibility and capital outside one propertyMoving is usually simpler, while future rent remains part of the plan.
Owning createsHome equity and control of the propertyRepairs, renewal risk and selling costs become your responsibility.
Rent pays for a home and flexibility. Ownership pays for a home, a loan and a stake in one property's value. Each path needs its own cushion.
20After the keys
Buying the home is not the same as being ready to own it
The down payment and closing costs should not empty your account. New owners lose jobs, need car repairs, replace furnaces and get special assessments in the first year like anyone else.
Keep the emergency fund from Part 3 out of the purchase. You are ready to buy when the cash left after closing can still carry the life inside the home.
Cash available before purchase$180,000
Closing costs and other upfront cash$15,000
After down payment and closing cash
$105,000About 26 months of the illustrative owner costs below
A homeowner can face the same job-loss or car-repair emergency as a renter, plus a failed furnace, plumbing leak, deductible, appliance replacement or special assessment. The purchase is complete when you can afford the home after the keys arrive.
Do I actually understand this?
Lena, 31, buying her first condo in Ottawa
- $60,000 saved after closing costs
- Condo priced at $480,000, so the minimum down payment is $24,000
- No other debt
- Monthly essentials about $3,200
What should Lena do?
21Before the signature
Know the five mortgage numbers before you sign
Before you sign, you should be able to explain five numbers to a friend. Purchase price: what you agreed to pay. Down payment: your cash up front. Principal: what you borrow. Interest rate: the price of borrowing it. Term and amortization: the two clocks.
Then look at the whole picture: cash flow, net worth, how long you will stay, how much flexibility you want, and the cushion you keep. The lender's maximum is one input. The rest is your life.
Purchase priceThe amount you agreed to pay for the property.
If purchase price, down payment, mortgage principal, interest rate, term and amortization still sound interchangeable, pause before signing and ask the lender to show the numbers on the contract.

What you now know

Rent is a housing cost with flexibility. Buying adds a down payment, mortgage interest, taxes, insurance, maintenance, fees and transaction costs, while principal creates equity.
The minimum down payment is not the full cash needed. Closing costs and an owner reserve belong in the plan before an offer.
Compare cash flow and net worth over the years you expect to stay. Return and appreciation assumptions can change the answer, so make them visible.
Use the FHSA and Home Buyers’ Plan only through their eligibility and repayment rules, and keep housing connected to your tax, investing and retirement plans.

Run the full rent-versus-buy calculator Test a mortgage payment Check the lender’s affordability lens Connect the down payment to account rules Carry the home sale into tax filing Compare the money you could invest instead Keep housing inside retirement Read province-specific newcomer housing basics

Core rules and examples: Financial Consumer Agency of Canada down-payment guidance, mortgage qualification and stress-test guidance, Canada Revenue Agency Home Buyers’ Plan rules and principal-residence reporting guidance.

The examples use 2026 Canadian rules and stated assumptions. Mortgage terms, provincial charges, lender policies and program eligibility can change.

Done with this part?

Mark it complete when you could explain it to a friend.

Come back any time your income, home or goals change. Your progress stays on this device.

Renting and buying are two ways to pay for a home

Rent buys a home and flexibility at a monthly price

The down payment sets the size of the loan

Closing costs arrive beside the down payment

Mortgage default insurance protects the lender, not your furniture

Home equity is what is left after the mortgage

A mortgage payment is mostly interest at first

Your term ends long before your mortgage does

Fixed and variable rates move for different reasons

The bank's maximum is not your home budget

The stress test asks whether the loan survives a higher rate

The mortgage payment is not the whole cost of owning

In a condo, the building's budget is your budget

The down payment has a cost even after it becomes equity

Compare the whole path, not two monthly payments

Change the life you are comparing

First-time buyers can pull the down payment from registered accounts

A down payment is only one part of a newcomer mortgage file

Selling costs money, even when the home gained value

Renting buys flexibility; owning changes which risks you carry

Buying the home is not the same as being ready to own it

Know the five mortgage numbers before you sign

Mark it complete when you could explain it to a friend.