Renting versus buying

From the All the Numbers wiki · Housing

Whether it is better to rent or to buy depends on what each costs each month, what the home is worth later, and what the money not spent on the home earns elsewhere. The planner does not guess at an answer. It runs both lives for the same household and shows where each ends up.

The comparison

The plan is run twice: once buying the home, once renting for the whole plan. Income, living costs and every other account are the same in both runs.

In any month, whichever side spends less on housing invests the difference in a taxable account at the same assumed return. The renter does that when the owner's mortgage payment, carrying costs and closing cash exceed the rent; the owner does it in months when the rent is the larger. Until the purchase closes, the buyer pays rent too.^[1] Without this step buying would look better or worse only because one side was left with idle cash.

Each year the planner reports each side's net worth. The crossover is the first year from which owning stays ahead; an early lead that is later given back is not a crossover. If either run has a month it cannot pay for, the comparison is marked as not fair, because one side was short of money that the other was not.

What drives the answer

The home's growth, which is an assumption and not a forecast.
The one return assumed on invested money; see investment returns.
Closing costs at purchase, including land transfer tax and default insurance, and selling costs at the end; see selling a home.
The mortgage rate and how rent grows.
Rent from a suite, which lowers what owning costs.

The stress tests and scenarios re-run the same plan with one of these changed, which is the way to see how much the answer depends on it.

Where to put the money

A related comparison asks where to put a given amount of saving while deciding. It deploys the same amount of pre-tax income into a TFSA, an RRSP, an FHSA and a taxable account, holds each for the same number of years at one return, and then cashes each in. The RRSP refund is not reinvested. The FHSA takes the amount up to its annual limit, and the rest is shown as after-tax money growing tax-free. The taxable account pays a 2% yield each year, taxed as ordinary income at the exit rate with no dividend tax credit, and the gain on exit is taxed at the inclusion rate times the exit rate.^[2] It is used to show the trade-off for a first-time buyer, and it is not advice.

What it does not do

A different return for the owner's invested difference, or leaving the difference in cash. There is one return for both.
A change in rent for a move or a lease ending, or a sale followed by renting again. See rent.
Anything the plan cannot know: the market, the house you would actually buy, and your future income. Where a figure is an assumption, the plan says so beside it.

Expected returns and fees · The default return is 6.35% a year, nominal and net of fees, for an 80/20 stock and bond portfolio. It is an expected long-run average, not a forecast, and an account's own rate replaces it.
Home prices over time · A home's value is projected by growing it at one assumed rate, 3.5% a year by default, which is PWL Capital's 1% real return on a house plus 2.5% inflation. It is an editable assumption, not a forecast, and the Simulation view shows how widely a real home's value varies around it.
How a mortgage payment is worked out · A fixed-rate Canadian mortgage compounds its interest twice a year, not monthly, so the monthly payment comes from a rate slightly lower than the quoted rate divided by twelve. The default rate is 4.27%, and the rate stays fixed for the whole amortization.
Land transfer tax · Ontario charges a tax on the price of a home, rising from 0.5% to 2.5% in brackets, and Toronto adds a second one of its own. A first-time buyer gets a refund of up to $4,000 from Ontario and $4,475 from Toronto.
Mortgage default insurance · A buyer putting down less than 20% must buy mortgage default insurance from CMHC or a competitor. The premium is 2.80%, 3.10% or 4.00% of the loan depending on the down payment, is added to the mortgage, and carries 8% Ontario sales tax paid in cash at closing.
Net worth, as the plan counts it · Net worth is everything the plan holds (cash, investment and registered accounts, homes at market value) minus mortgages, credit lines, debts and tax owing. It is not reduced for selling costs or for tax on money still in an RRSP.
Rent, and when it stops · Rent is its own line in the plan rather than part of living expenses, and it stops the month your first home closes — because a household that has bought is not paying both. Give it an end date if you would keep renting past that.
Renting out a suite · Rent from part of your home is taxable income. The costs of the whole home are deductible only for the rented share, mortgage principal and land transfer tax are not deductible, and a loss offsets other income when the rental is run to earn money. A lender may count part of the rent when you apply.
RRSP room, deduction and withdrawals · Room accrues at 18% of earned income up to the annual cap, contributions earn a deduction refunded the following April, and withdrawals are taxed as income. The plan assumes you start with no carried-forward room unless you say otherwise.
Scenarios and life events · The Scenarios page lets you drop dated events onto a copy of your plan, such as a job loss, a market drop or a rate jump, and see where net worth ends up. Each event is a change to the plan run through the ordinary projection, not a separate calculator.
Selling a home · A sale turns the home's projected market value into cash after selling costs of 5.8% and the mortgage payout. The gain on a principal residence is exempt from tax, apart from the part that was rented out when the exemption does not cover it.
Stress tests · A stress test reruns the whole plan with one thing made worse, such as a higher mortgage rate at renewal or a year of lost income, and reports how far final net worth moves and whether the plan still pays its bills. It carries no probabilities.
TFSA contribution room · Room starts accruing the year you turn 18, not the year you open an account, and it never expires. Withdrawals come back the following January. Limits past 2026 have not been announced, so the plan projects them by the rule the Act sets and says so.
The First Home Savings Account · $8,000 a year with one year of carryforward and $40,000 for life, deducted from income and withdrawn tax-free for a first home. The refund is credited the following April, and the account winds up into an RRSP if it is never used.
What a house costs to hold · Property tax, maintenance, insurance and utilities are estimated as rates against the home's value, with sourced defaults. Property tax then grows with the home while the rest grow with inflation.

References

↑Standard rent-vs-buy method (e.g. NYT "Is It Better to Rent or Buy?" — invests the difference on whichever side has it) · Rent-vs-buy — whichever life spends less on housing in a month invests the difference in a taxable account at the same assumed return (the renter when owning costs more, the owner when rent costs more); the buyer rents until closing · effective 2026-09-19
↑CRA TFSA/RRSP/FHSA rules; the equal-pre-tax-cost framing is the standard textbook comparison (e.g. Kesselman & Poschmann, C.D. Howe 2001, "A New Option for Retirement Savings: Tax-Prepaid Savings Plans") · The shelter comparison deploys the SAME pre-tax amount into each of TFSA, RRSP, FHSA (to the annual limit; the overflow is after-tax money growing tax-free) and a taxable account, holds it for the horizon at one return and liquidates; the RRSP refund is not reinvested; the taxable account pays out a 2% dividend yield taxed yearly at the exit rate as ordinary income (no dividend tax credit) and the gain on exit at the inclusion rate × the exit rate · See the source · effective 2026-09-19