Should you rent or buy a home in Canada?

Compare the full cost, not the monthly payment

Whether to rent or buy in Canada depends less on rent versus a mortgage payment and more on the full cost of each over the years you plan to stay. Buying tends to make more sense when you expect to stay a long time and can pay the down payment and closing costs without emptying your emergency fund. Renting can be the better choice when you value flexibility or might move soon.

Costs of owning that rent does not show

A mortgage payment is only part of what owners pay. There is property tax, home insurance, and maintenance, from a new furnace to a leaky roof. Condo owners pay monthly condo fees, which can rise. Utilities a landlord used to cover may become yours. And part of each mortgage payment is interest, which, like rent, is money you do not get back. Only the principal part builds your equity.

Costs on the day you buy and sell

Buying comes with one-time costs on top of the down payment. Depending on your province, there may be a land transfer tax or title fees. You will likely pay for a lawyer or notary, a home inspection and moving. If your down payment is less than 20% of the price, you will usually need mortgage default insurance, and its premium is often added to your mortgage.

Selling has costs too, such as real estate commissions and legal fees. These buying and selling costs are the main reason a short stay often favours renting. If you sell after only a couple of years, there is little time for your home to grow in value or for these costs to spread out.

What renting gets you

Renting gives you flexibility and fewer surprise repair bills. It also leaves the money you would have used for a down payment free to stay invested, for example in a TFSA. Over time, that can grow too. The catch is that renting and investing the difference only works if you actually invest it. Rent can also go up, and you may have to move when you would rather stay.

Questions to ask yourself

Before you decide, try answering these honestly. How long do you expect to live in this city and this home? How steady is your income? After the down payment and closing costs, would you still have an emergency fund? Does the full monthly cost of owning fit in a budget built from what you really spend? And are you counting on prices rising to make buying work? No one can promise that they will.

Saving for a down payment

If buying is your goal, where you save matters. A First Home Savings Account (FHSA) is built for first-time buyers, and a TFSA can also hold down payment savings. Some buyers also use the RRSP Home Buyers’ Plan. Each has its own rules, so read the official details from the Government of Canada before you choose. Whatever you pick, saving a set amount on payday makes progress steady.

Questions

Is it better to rent or buy in Canada?

It depends on how long you will stay, your local prices and rents, and whether you can buy without draining your savings. Compare the full cost of both over the same number of years.

What costs come with buying a home besides the down payment?

Common ones are land transfer tax or title fees, legal fees, a home inspection, moving costs and, with a smaller down payment, mortgage default insurance. After you move in, add property tax, insurance and upkeep.

Is rent money wasted?

No. Rent pays for a place to live, much like the interest, property tax and upkeep that owners pay and never get back. Compare those costs, not rent versus the whole mortgage payment.