Is it better to rent or buy in Canada?

Buying builds long-term home equity and protects against rent inflation, but carries high transaction costs, mortgage interest, maintenance, and property taxes. Renting offers flexibility and lower fixed monthly costs, allowing you to invest your down payment in higher-return equities.

What is the 5% rule for renting vs buying?

The 5% rule estimates that non-recoverable costs of homeownership (property tax ~1%, maintenance ~1%, cost of capital ~3%) equal roughly 5% of the home's value per year. If renting a comparable home costs less than 5% of its purchase price per year, renting is mathematically favorable.

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Rent vs Buy Calculator

Should you keep renting or buy your first home? This guide explores the financial and lifestyle factors you should consider.

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Home price growth / yr% Rent increase / yr% Investment return / yr% Property tax / yr%Share of the home value Maintenance / yr%Share of the home value Amortization

The verdict

If you buy

If you rent

Net worth at the end: home equity after 5% selling costs, plus investments.

Buying a Home

✓ Build equity over time instead of paying a landlord.
✓ Full control over your living space and renovations.
✗ Higher initial costs (down payment, closing costs).

Renting

✓ Lower monthly maintenance costs and mobility.
✓ Freedom to invest down payment capital elsewhere.
✗ Monthly payments do not contribute to ownership.

The "5% Rule"

A common rule of thumb is the 5% rule. If the unrecoverable costs of homeownership (property tax, maintenance, and capital cost) are higher than the cost of renting a similar property, renting may be the better financial choice.

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