Rent vs Buy Calculator

How to use the rent vs buy calculator

1. Under Buying, enter the Home price, your Down payment, the Mortgage rate (%) and the Amortization (years), then the costs of owning: Closing costs (% of price) (land transfer tax, notary or lawyer, inspection), Property tax (% of value per year), Maintenance (% of value per year), Home insurance (per year) and Condo fees (per month). Add the expected Home appreciation (% per year) and the Selling costs (% of value) (real estate commission).
2. Under Renting, enter the Monthly rent, the expected Rent increase (% per year) and your Tenant insurance (per month).
3. Under Horizon and assumptions, choose the Comparison period (years), the Investment return (% per year) you could earn on money you don’t spend, and the Inflation for insurance and fees (% per year).

The tool states which option is ahead at the end of the period and shows the Monthly mortgage payment, the Cost of owning, first month, the Cost of renting, first month, the Cash needed up front, the Net worth if you buy, the Net worth if you rent and the Break-even year, the first year in which buying catches up with renting. The chart and the Year by year table (exportable with Download CSV) follow both net worths; a second table adds up the money spent that you don’t get back.

How the comparison works

A fair comparison has to follow the money on both sides, so the tool simulates the period month by month:

• Mortgage: the payment uses the Canadian rule for fixed-rate mortgages, with interest compounded semi-annually: monthly rate i = (1 + r/2)^(2/12) − 1 and payment P = L × i ÷ (1 − (1 + i)^−n). Below 20% down, the CMHC premium (2.80% to 4.00%) is added to the loan, and the minimum down payment rules apply.
• Owning costs each month: mortgage payment + property tax and maintenance (percentages of the current home value) + insurance + condo fees (growing with inflation).
• Renting costs each month: rent (raised once a year) + tenant insurance.
• The renter invests the down payment and closing costs at the start. Every month, whoever spends less invests the difference at the investment return. After the mortgage is paid off, it is usually the owner who invests.
• Net worth: for the buyer, home value × (1 − selling costs) − mortgage balance + investments; for the renter, the investments.

Example

With the default values ($500,000 home, $100,000 down at 4.5% over 25 years, $2,400 rent), the mortgage payment is $2,213.89 and owning costs $3,088.89 in the first month against $2,425 for renting. Buying starts behind (the renter keeps $107,500 invested against $75,000 of equity after selling costs) and catches up in year 4. After 25 years, the buyer is at about $1,081,000 and the renter at about $518,000. With no appreciation, a lower rent or a higher return, renting can come out ahead: test your own assumptions.

Assumptions and limits

The mortgage rate is assumed constant for the whole period, although Canadian terms usually last 5 years. Taxes on investment returns are ignored, as if the money were in a TFSA or RRSP; the capital gain on a principal residence is tax-free. The tool does not model the First Home Savings Account, the RRSP Home Buyers’ Plan, sales tax on the CMHC premium or major renovations. These results are estimates based on your assumptions, not financial advice.