Buy vs rent methodology: how the calculator works

A monthly simulation with equal budgets

The calculator steps through your horizon one month at a time, up to 40 years. Each month it works out what the owner spends (mortgage payment, property tax, home insurance, condo fees, maintenance, extra utilities and any assessment allowance, less net suite income) and what the renter spends (rent and tenant insurance).

To keep the comparison fair, both households spend the same total monthly housing budget, which is the larger of the two costs. Whichever household spends less invests the difference in an investment account at your chosen return. The renter also invests the cash the buyer spent at purchase: the down payment, closing costs and moving costs.

At the end of the horizon the buyer’s net worth is the home’s value, less the mortgage balance, less selling costs, plus any investments. The renter’s net worth is the investment account. The headline figure is buyer net worth minus renter net worth.

Mortgage mechanics

The default models the semi-annual compounding convention commonly used for Canadian fixed-rate mortgages; a monthly option is available for contracts that use it. Confirm the rate and compounding convention in your actual mortgage contract. The engine models both by converting semi-annual rates to an equivalent monthly rate. You choose the amortization and term (default five years); at each renewal the payment is recalculated for the remaining amortization at the renewal rate, which by default equals the original rate.

The minimum down payment follows the federal rule: 5% of the first $500,000 plus 10% of the portion from $500,000 to under $1.5 million, and 20% at $1.5 million or more. Below 20% down, the CMHC-style premium is added to the mortgage at 4.00% (5% to 9.99% down), 3.10% (10% to 14.99%) or 2.80% (15% to 19.99%) of the loan, plus 0.20% if the amortization exceeds 25 years. Insured mortgages are limited to prices under $1.5 million.

Closing costs and transfer tax

Closing costs combine a provincial transfer charge with legal fees, title insurance, an inspection and other items. Alberta has no land transfer tax but charges Land Titles fees on the transfer and the mortgage. Ontario, British Columbia and Manitoba use published tiered schedules, and Toronto adds a municipal tax.

Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador and Saskatchewan are labelled approximate; confirm figures with your lawyer or notary. You can override the result with your own number.

For Toronto homes containing one or two single-family residences, the model uses the City’s residential municipal land transfer tax schedule effective April 1, 2026, including the higher marginal rates above $3 million. Ontario’s provincial tax is calculated separately. Municipal administration fees, foreign-buyer taxes, unusual property classifications and eligibility decisions are not included; confirm them with your lawyer and allow for them in other closing costs.

Renewals, selling costs and penalties

Selling costs are deducted from the buyer’s net worth at every point in time, as if the home were sold that month. They include a commission percentage, GST on the commission, and legal and other fees. If the sale falls between renewal dates, an optional prepayment penalty of a set number of months’ interest is added; setting it to zero turns it off.

Break-even, real dollars and the sensitivity grid

Break-even is the first month from which buying stays ahead of renting after selling costs and for the rest of the period modelled. A brief crossing that later reverses does not count. In some scenarios buying does not catch up within 40 years.

Results can be shown in nominal dollars or in real, inflation-adjusted dollars that convert future amounts to today’s purchasing power. The sensitivity grid reruns the full model across a range of two inputs, such as appreciation and investment return, and shows buyer minus renter net worth in each cell.

Monte Carlo analysis

The probability view reruns the simulation many times, drawing each year’s home-price growth and investment return from a normal distribution centred on your inputs. A fixed seed makes results reproducible. The defaults are 1,000 runs, a standard deviation of 6 percentage points for home prices and 12 for investments, and a correlation of 0.2; you can adjust volatility and correlation.

The reported probability is the share of runs in which buying finishes ahead. In the default illustrative scenario it is about 61%. Treat it as a way to see how fragile a result is, not as a forecast: real markets can behave differently.

Limitations

Every model simplifies. Investment taxes are represented by a single effective annual rate (default zero), not account-by-account tax rules. Mortgage interest and property tax on a principal residence are not tax-deductible in Canada, so none is modelled. The principal residence exemption is assumed to apply to the sale. Family circumstances, job changes, health and housing needs are assumed constant.

Growth rates, rents, interest rates and returns are inputs, not forecasts, and personal preferences such as stability or control are not financial. See the assumptions page for every input and the glossary for terms. This content is educational and not advice.