Buy vs rent guide
What is buy vs rent?
Buy vs rent is a side-by-side comparison of two ways to be housed: owning a home with a mortgage, or renting a comparable one and investing whatever money you do not spend on housing. The aim is not to crown a permanent winner. It is to show what each path costs, what it builds, and how long it takes for owning to catch up.
The question behind the comparison
Every household needs somewhere to live. Owners pay a mortgage, property tax, insurance and upkeep, and they tie up cash in a down payment. Renters pay rent and a small insurance premium, and keep their cash free to invest. A buy vs rent analysis puts both on the same footing and asks one question: after a chosen number of years, which household has more net worth?
That framing matters because the monthly bills alone mislead. A mortgage payment can look similar to rent while the real cost of owning sits in other lines. Meanwhile the owner's mortgage principal and the home's value are building wealth in a way that rent never does. Buy vs rent tries to weigh the leak and the build together.
What each household actually pays
To make this concrete, suppose a $600,000 home with 20% down ($120,000), a 4.5% five-year fixed mortgage on a 25-year amortization, and Alberta-style costs: property tax at 0.65% of value, $1,500 a year of home insurance, maintenance at 1% of value and $150 a month of extra utilities. The comparison renter pays $2,300 a month plus $300 a year of tenant insurance. These are illustrative planning inputs, not market data.
Running those inputs through the calculator, the first-month cash cost looks like this:
| Item | Owner | Renter |
|---|---|---|
| Mortgage payment | $2,657 | — |
| Rent | — | $2,300 |
| Property tax | $325 | — |
| Home or tenant insurance | $125 | $25 |
| Maintenance (1% of value a year) | $500 | — |
| Extra utilities | $150 | — |
| Total per month | $3,757 | $2,325 |
Where the money goes over ten years
Over ten years in the same example, the owner's cash outlay totals about $471,075 and the renter's about $319,688. Of the owner's total, roughly $131,752 is mortgage principal, which becomes equity. The rest, around $339,322, is interest, property tax, insurance, maintenance and extra utilities. That is the part of owning that you do not get back.
The renter's $319,688 is also not recovered, but it is smaller, and the renter's invested difference compounds alongside it. Neither path is free. The useful comparison is not 'rent is wasted money' versus 'a mortgage is savings'. It is: how large is each household's net worth when the clock stops?
The scoreboard: net worth at a chosen horizon
Net worth for the buyer is the home's value, minus the remaining mortgage, minus the costs of selling, plus any investments. For the renter it is the investment account. Subtract one from the other and you get the gap at your horizon.
In this example the answer depends heavily on how long the household stays:
| Years held | Difference | Reading |
|---|---|---|
| 3 | −$19,514 | Renting ahead |
| 5 | −$4 | Essentially even |
| 7 | +$11,268 | Buying ahead |
| 10 | +$41,686 | Buying ahead |
| 15 | +$91,982 | Buying ahead |
Why the early years favour renting
Owning has front-loaded costs. Closing costs arrive on day one, and selling costs, including a realtor commission, arrive on the day you leave. In the ten-year example selling costs are about $38,047. Those fixed hurdles take years of equity growth and principal repayment to overcome, which is why shorter stays tend to tilt toward renting and longer stays toward owning under these assumptions.
Our break-even guide walks through the crossover point in detail, and the break-even tool lets you find it for your own numbers.
What buy vs rent does not capture
A financial comparison leaves out things that matter. Owners can renovate, keep a pet without asking, and stay as long as they can pay. Renters can move for a job without selling, avoid repair surprises and are not exposed to a single asset. Neither the freedom nor the stress shows up in a net-worth line.
Results also depend on assumptions about home-price growth, rent growth and investment returns that nobody can know in advance. Treat the output as a map of how the pieces fit together, not a forecast.
- Flexibility to move, upsize or downsize quickly
- Peace of mind from long-term stability, or from having no repair bills
- Risk tolerance: a home is one concentrated asset, an investment portfolio can be diversified
- Tax details specific to your situation, including how a principal residence is treated
How to use this site next
Start with the main buy vs rent calculator and enter your own price, down payment, mortgage rate, rent and time horizon. Then read how to decide to learn which results to stress-test, and use the checklist to make sure nothing is missing. Reading the methodology page explains each assumption in the engine.
Questions people ask
What does buy vs rent mean?
It is a comparison of the total cost and wealth outcome of owning a home with a mortgage against renting a comparable home and investing the money you save. The result is usually expressed as the difference in net worth after a set number of years.
Is buying always better than renting in the long run?
No. Under the illustrative inputs here, owning pulled ahead after about five to six years, but a higher mortgage rate, weaker price growth or higher upkeep can push the crossover much later or remove it. The outcome depends on your inputs.
Does the comparison include the down payment?
Yes. The renter is assumed to invest the cash the buyer spends up front on the down payment and closing costs, so that money is not treated as free on either side.
Can a buy vs rent calculator tell me what to do?
It can show how the numbers behave under your assumptions, but the decision also depends on your plans, job stability, risk tolerance and lifestyle. Think of it as a tool for asking better questions.
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.