Rent vs Buy

Name: Toronto Real Estate Agent
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If you can rent a similar home for less than per month, then renting is better.

Buying is better, even if you could rent for free.

If you can rent a similar
home for less than ...

Buying is better, even if
you could rent for free.

PER
MONTH

... then renting is better.

The home pays for itself.

Costs after

Buy

Initial costs

Recurring costs

Opportunity costs

Net proceeds

Total

How to Read the Charts Charts that are relatively flat indicate factors that are not particularly important to the outcome. Conversely, the factors that have steep slopes have a large impact. Disclaimer: The calculator and all the calculations are for illustrative purposes only and may not reflect the actual numbers for any mortgage or investment. You should not rely on the numbers calculated in this calculator as an indication of your financial needs and we recommend that you seek out your own financial, investment, tax, legal or accounting advice. The information herein shall not be considered as investment advice or as a recommendation to enter into any transaction.

Home Price

This Rent vs Buy calculator gets your inputs and calculated the approx break even point rent. Which if you can rent a place EQUAL or LESS than this rent, it's better continue renting. If you can not find a place with that rent amount, you need to consider the difference ($$) between the actual rent you pay right now, and the break even rent calculated in this Renting versus Buying calculator. If you want to compare renting versus buying your own home, you need to compare apple with apple. For example, if you are a person who currently rents a bachelor studio or a one bedroom apartment, you need to use the average price of a similar property. You might wonder how to find out an average price of a property in your area? Contact a Top Toronto real estate agent or a REALTOR® in your area for details about the prices, then go to the next step in the calculator.

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Home Price ?

Choose the home price.

How Long Do You Plan To Hold On to Your Property

When comparing renting versus buying a home, you need to consider that once you purchase a home, there are some fixed costs at the beginning, which we’ll get to them down below. Those fixed costs will spread out over the years that you own the property. If you plan to keep your property 5 years or 10 years or even more, choose any number that is relevant to your situation.

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How Long Do You Plan to Hold On To Your Property? ?

Total years that you will hold on to your home before you sell it.

The Mortgage Calculations

Mortgage Payments are the single biggest payments when you purchase a home, and to decide whether to rent or to buy. This Rent vs Buy calculator is based on traditional Canadian mortgages. Each mortgage payment consists of principal and interest. In order to compare renting to buying, you need to consider your mortgage payments into account, especially the amount of interest that you pay. Mortgage payments are the single biggest monthly payment that affects the whole rent versus buy comparison. While interest goes to the bank, the principal portion of your mortgage will be like a savings and will pay off the original loan amount. Literally you’re adding up equity in your home by paying principal. First you choose a mortgage interest rate. To get your mortgage rate you can contact a mortgage broker in your area. * If you pay less than 20% down payment you’ll have to insure your mortgage through companies such as CMHC, then you need to add the monthly insurance premium too.

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Interest Rate ?

Choose a mortgage interest rate.

per month

Down payment ?

Then the amount of down payment, which depending on whether you’re a first time home buyer, or what is your Total Debt Ratio etc can be determined. Usually big banks in Canada give uninsured mortgages with minimum 20% down payment, if your income supports the mortgage amount. For many first time home buyers finding the down payment is hard, here you can see how to find down payment to purchase a condo.

Length of mortgage ?

Next is your Amortization or length of mortgage. If you go with 20% down payment or more, it could be up to 30 years and with less than 20% down payment, your mortgage amortization is maximum 25 years. You need to talk to your mortgage broker to make sure that your lender approves of all of these, because this is not mortgage advice.

Capital Gain, Future Value of Home and Other Investments

A big part of gains that you might have, other than paying principal part of your mortgage, could be Capital gain. If you look at the Real Estate Market Trends in Toronto, you’ll see in the long term the real estate market was moving up by an approx average over 6% annually since the 1990s, regardless of fluctuations in the short terms. As of now that I’m writing this article, Capital Gains on your principal residence is tax free. That might change in the future, thus consult with your accountant about those or any tax implications that you might have.

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Home price growth rate ?

Put the average annual home price appreciation in your area. (Percent)

Rent growth rate ?

The rents also go up every year. In a city like Toronto however there are many buildings that are under rent control. The Government of Ontario every year releases the rent increase rate for rent controlled properties.

Investment return rate ?

To buy a home you need a down payment. You could also buy stocks or mutual funds or GICs with that cash. Mutual funds or GICs have returns too, not big returns though, but they might have some returns for you. You can put the amount of annual return that your savings make you, if you invest in mutual funds or GICs or money markets.

Inflation rate ?

Inflation rate is the amount that your cash loses value over time. Literally, when you put your cash in Mutual Funds and you receive 4% dividends in a year, if the inflation rate is 2% in that given year, it means that your cash created 4% return but lost 2%, so your net is 2% up.

Taxes

By the time that I’m writing this, in Canada, capital gain on your principal residence is tax free ( this might change at any point, consult with your accountant ). You can put annual approx property taxes below. To get the annual property tax, go to your City’s website. In the city of Toronto, you can use their property tax calculator online and find out how much your annual property tax would be. Consult with your tax advisor to get information about marginal and capital gain taxes then use it in this calculator if applicable to you.

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Annual Property Tax Rate ?

Amount you will pay each year to your local government, expressed as a percentage of the home value.

for first year

Marginal tax rate ?

Check with your accountant first to see if this applies to you or not.

Closing Costs

In this Rent vs Buy calculator you can input the closing cost as a percentage of your home price. Closing costs are the costs at the time of purchase and also the costs at the time of sale. Closings costs can be Land Transfer Tax to Title Insurance and Solicitor fees for the purchase. Closing costs on the time of sale can be the mortgage discharge, real estate, and solicitor fees. In this Rent vs Buy calculator you can input the costs as a percentage of your home price which will make it easier for you regardless of the price of a home you choose.

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Cost involved in buying a home ?

Closing costs on the purchase of your home depends on the place that you buy the property. If you buy a property in Ontario you have a Land Transfer Tax rate, and if you buy in the City of Toronto you have another on top of it. If you are a first time buyer you might be eligible for Tax Credits as well. For example in the city of Toronto you can have up to $8,475 rebate on your Land Transfer Tax depending on the purchase price.

Cost involved in selling a home ?

To get an idea of the closing costs you can see real estate fees in Toronto. Depending on the situation the average cost on disposition might vary depending on your area of residence. At the moment that I write this article the approx average real estate commission in Toronto and other costs on sale is around 5% more or less.

Maintenance Costs of a Home and other costs of Home Ownership

Being a homeowner has indirect costs that you might not pay right off the bat. In order to find out is renting better or buying, this rent vs. buy calculator even calculates the costs that might happen down the road. Below you can add any cost that you want and see the result reflected on the overall calculation.

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Annual Renovation Fee ( Houses, Non Condos ) ?

Maintenance or renovations costs mainly apply to those who buy a house. For example when you have a house you need to renew the roof approx every 15 years, so if a whole roof costs $8,000 then it translates to $530 per year. However when you own a condo apartment, you don’t have that cost, but you have monthly condo fees instead.

first year

Annual Homeowner’s Insurance ?

Homeowners insurance is another cost that you’ll have. It’s a bit more than the tenants home insurance ( which you might already be paying anyways). To get a quote on the exact price, you can contact an insurance broker.

first year

Monthly utilities ?

Monthly utility bills usually are the same if you move from a condo rental to your own condo apartment in Toronto. But if you move from a condo to a house you’ll have more utilities to pay, as the heat or A/C will be your own responsibility when you purchase a house.

Monthly common fees ( Condos ) ?

This applies to you if you buy a condo apartment. In condos you’ll have a monthly fee usually called Condo Fee or Condo Maintenance Fee that usually covers common expenses and some of the utilities and other services that a condo building provides for its residents. It can vary depending on how big your condo is. To know the average condo fee in any area in Toronto, contact a Top real estate agent in Toronto.

Additional Renting Costs

If you are a tenant you might have some additional costs as well, which you can input here. Additional costs mainly include the Tenant Insurance, that covers your liabilities and contents and many tenants pay for it regardless.

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Monthly Tenant Insurance ?

As a percentage of the annual rent.

Rent vs Buy

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