Buy vs rent guide
New build vs resale in a buy vs rent decision
A new build and a resale home can sit on the same street and still produce different buy vs rent results. This guide compares an illustrative new build with an illustrative resale home, focusing on price, financing terms and maintenance.
What differs between new and resale
New builds often cost more per square foot, may have lower early repair needs, and can qualify for financing terms that resale homes do not. Resale homes usually cost less to buy, may need more upkeep sooner, and can be inspected and moved into quickly.
None of these differences is guaranteed. A new home can have deficiencies, and a well-kept older home can have low upkeep costs. The calculator can only reflect the assumptions you give it, so be explicit about them.
The comparison below is an illustration, and the maintenance numbers are assumptions rather than measurements of any kind of home.
Two illustrative homes
The new build: $650,000 with 10% down, a 30-year amortization, maintenance at 0.5% of value a year. The resale home: $600,000 with 10% down, a 25-year amortization, maintenance at 1.2% of value a year. Both are compared with renting at $2,300 a month.
Other assumptions are the same: a 4.5% mortgage rate, 3.5% yearly appreciation, 3% rent growth and a 5.5% return on the renter's investments. With less than 20% down, mortgage default insurance applies. The premium is about $19,305 on the new build and about $16,740 on the resale home.
Insured amortization is normally 25 years, but 30 years is available to first-time buyers and buyers of newly built homes. Confirm eligibility with your lender, since this rule can change.
| New build ($650,000) | Resale ($600,000) | |
|---|---|---|
| Amortization | 30 years | 25 years |
| Maintenance assumption | 0.5% of value a year | 1.2% of value a year |
| Monthly mortgage payment | About $3,047 | About $3,081 |
| Buyer minus renter after 10 years | +$42,975 | +$2,801 |
| Approx. break-even | 6.8 years | 10.3 years |
| Buyer minus renter after 5 years | -$12,532 | -$25,557 |
The maintenance assumption does the work
In this example, the gap between the two results is driven largely by the maintenance assumption. If we give the new build the same 1% maintenance, the renter finishes ahead by $6,583 after 10 years. If we give the resale home 1% instead of 1.2%, the buyer's 10-year lead is $21,100 rather than $2,801.
That means the result is a statement about what you believe about upkeep, not about new homes in general. If you are comparing real properties, get a thorough inspection, review the age of the roof, windows and mechanical systems, and estimate near-term repairs honestly.
Read the warranty on a new home carefully. Coverage, duration and exclusions vary, and the cost of repairs after coverage ends is still yours. See maintenance and repairs.
- Ask what a warranty covers and for how long.
- For a resale, ask for the age of the roof, furnace, windows and plumbing.
- Set aside a repair reserve for either type of home.
The 30-year amortization trade-off
A longer amortization lowers the monthly payment, which can help with qualifying and cash flow. It also means more interest over time and, for an insured mortgage, a higher premium because of the 0.20% surcharge when amortization exceeds 25 years.
For the new build, the monthly payment is about $3,047 at 30 years versus about $3,338 at 25 years, a difference of roughly $291 a month. The 10-year result is almost the same either way (+$42,975 versus +$42,618), so the longer amortization mainly changes cash flow rather than the end result in this example.
Timing, deposits and the wait to close
Buying a home that is not yet built often means paying deposits over time and closing months or years later. During that period you may still be paying rent while money is tied up in deposits. Include that overlap in your plan.
The price you agreed to and the market at closing can differ. Closing costs can also include items specific to new homes. Taxes that apply to new homes can differ from those for a resale, so confirm with your lawyer what will be due. Land transfer taxes and exemptions vary by province, and some new-build rebates change over time, so confirm current rules.
How to choose
Start by deciding whether you need the home soon or can wait, then compare total costs rather than price alone: the premium, the payment, the maintenance outlook and the one-time costs. Test both homes under the same stress cases, such as lower appreciation and higher maintenance.
If a new build wins only because of a very low maintenance assumption, or a resale wins only because of a high price gap, the result is fragile. Look for an option that holds up under several assumptions. The sensitivity analysis guide shows how to do this.
Questions people ask
Is a new build cheaper to own than a resale home?
Not automatically. A new home may have lower early repairs, but a higher price can offset that. Compare total costs, including warranty terms and your own maintenance estimate.
Can I get a 30-year amortization on any home?
Insured mortgages are normally 25 years, with 30 years available to first-time buyers and buyers of newly built homes. Confirm your eligibility with a lender.
What should I check before buying pre-construction?
Look at the deposit schedule, the closing date and what happens if it moves, the warranty, the taxes due and your rent overlap. Have a lawyer review the agreement.
Does a new build appreciate faster?
There is no reliable rule. Appreciation depends on the area and the period, and past results are not guaranteed to repeat.
Official references
Educational information, not financial, tax, legal or mortgage advice. Rules and rates change; confirm current details with an official source or a qualified professional.