Selling vs renting out your home through a buy vs rent lens

The owner’s version of buy vs rent

When you already own, three broad options appear: sell and move into a rental, sell and buy another home, or keep the home and rent it out while you live elsewhere. Each one changes which costs you carry and which assets keep working for you.

A useful way to compare them is the same way the main calculator compares buying with renting: look at where your money ends up after all costs, over the time you realistically expect to be in each position. Equity locked in a home earns whatever the home earns; equity released by selling can be invested elsewhere, but only after selling costs and any taxes.

This page is educational. It does not replace advice from a lawyer, an accountant and a mortgage professional who can see your full picture.

What selling really costs

Selling is not just agreeing on a price. Costs commonly include real-estate commission (see how commission works), GST on that commission, legal fees and a possible mortgage prepayment penalty if you sell before your term ends.

In the site’s default illustrative scenario, a $600,000 home grown at 3.5% a year is worth about $846,359 after ten years, and total selling costs are about $38,047 using a 4% commission, GST on the commission, and legal and other fees. If the commission is set to 0%, selling costs fall to about $2,500, which shows how much of the total comes from commission and the tax on it. These are planning inputs, not market rates.

Penalties add to this when a sale falls between mortgage renewals. Selling after seven years in the same scenario, with a five-year term, costs about $38,995 including an assumed three months of interest as a penalty, compared with about $34,561 without one.

The selling costs tool lets you change each item. The guide on selling costs and buy vs rent explains how they affect break-even.

Mortgage terms and penalties

Breaking a fixed-rate mortgage early can trigger a prepayment penalty, often the greater of a few months of interest or an interest rate differential amount. Variable-rate mortgages commonly carry a smaller penalty. The exact formula is in your mortgage contract, so request a written penalty quote from your lender before you list.

Timing matters. Selling near the end of a term, or porting the mortgage to a new property if your contract allows it, may reduce or avoid a penalty. Ask your lender what options exist well before you decide.

If you keep the home and rent it out

Renting out a property turns you into a landlord, with income and new obligations. Rental income is generally taxable, and different rules apply to rental use than to a home you live in, so speak with an accountant before you rent it out. Your insurance needs to reflect the new use, and your mortgage lender may need to be told.

Compare expected rent with the full cost of carrying the property: mortgage interest and principal, property tax, insurance, repairs, any condo fees, vacancy between tenants and, if you hire one, property management. A rent cheque that covers the mortgage can still leave you short once those items are counted.

Landlords also have legal duties around notices, deposits, repairs and rent increases. Rules differ by province; in Alberta, check the current residential tenancy rules and the City of Calgary information for landlords.

• Realistic rent compared with the total monthly carrying cost
• A vacancy and repair allowance, not just the best-case month
• Insurance written for a rented property
• Who handles tenant calls, showings and repairs if you move away
• Tax treatment of rental income, and what happens to the home’s tax status over time

Tax questions to settle before you decide

The gain on selling a home that qualifies as your principal residence is generally tax-free, and the sale must be reported on your tax return. That treatment depends on designation rules, so confirm yours with a tax professional.

If a home has been rented out, used partly for business or owned by a non-resident, different rules apply. Do not assume the principal residence exemption covers every year you owned the property. Read principal residence exemption and taxes for the general picture.

Questions to bring to an agent

Whether you are selling or renting, an agent can explain current marketing options, likely preparation costs and the timeline from listing to possession. For a rental, ask what leasing support is offered and what it costs.

Prepare a one-page summary of your mortgage balance, your lender’s penalty estimate, your target timeline and your alternatives. Talking to a PRPTY agent lists what to bring.