Renting vs Buying

Many people have strong opinions about which is better: buying your own home or renting from someone else.

In reality, both have their benefits, and which you choose will depend on your lifestyle, budget, needs for the future and views on the future of the real-estate market. (Easier said than done, right?)

How to break it down

One of the arguments against buying is that owning a home costs more money than renting, depending on the market you live in. While cash expenses can often be higher for owning in the short-term, it’s important to consider the long-term implications of renting versus owning. Let’s break down the numbers so you can understand the trade-offs.


Rent $1,500

Rental insurance $30

Utilities $70

Total $1,600


Mortgage interest $1,200 interest

Mortgage principal $300 principal

Property taxes $250

Utilities $125

Home insurance $50

Total $1,925

You’ll notice that it is more out-of-pocket expense when owning, but it’s important to understand the benefits of homeownership. Ask yourself a few questions:

  • Notice in the example above that $300 is going directly to the principal of your mortgage, meaning I’m investing that amount. “If I rent, will I actually save money in another way, like in an RRSP or TFSA?” Be realistic with your own savings habits. If you’re not forced to put money against the principal of your home, will you regularly transfer money into your savings?

  • “Am I comparing equal properties when comparing costs? For example, am I moving from a 1-bedroom rental to a 3-bedroom house?” Be sure costs are comparable in your renting and owning scenarios.

  • “How will this look in 10 years? Or in 30 years?” Keep in mind that homes can appreciate at a faster pace than many investments, like mutual funds or GICs. Keep in mind that you will, at some point, pay off your mortgage, so your living expenses will greatly decrease, whereas rental costs will continue to rise.

The benefits of owning

Forced savings

In an owning scenario, part of your mortgage payment goes toward the principle of the home. This is essentially “forced savings,” meaning you can’t opt out of saving this amount of money.

Sense of pride and stability

It’s engrained in us that home ownership is an accomplishment. Standing within your own four walls brings a sense of pride and success, a psychological feeling you don’t get while renting. It allows you to sprout roots and settle into secure living.

Home increase in value

The average home price in Toronto in 1985 was $109,094. Fast-forward to 2015 and you’re looking at five times that number: $566,696. Even with drops in the market, homes usually increase in value over longer periods of time.

Real estate has permanent value

Simply put, land is a scarce resource. While stocks and investments waver, and the housing market fluctuates, real estate as a long-term investment is a solid idea. Even if the stock market changes, your home or land will still be desired in the future especially if it’s located in a large city.

Homeownership pays off when your home is paid off

Unlike renting, homeownership provides a dramatic drop in living expenses over the long term. Once your home is paid off, you only have minimal utility and tax costs to worry about, whereas rent continues to increase, even into your retirement. Your disposable income may be fixed later in life—based on your pension and retirement funds—so removing a major monthly expense will be appreciated at that stage

Can rent property

When a home is yours, you have the option of renting it over the short- or long-term, to cover your costs. This can give you flexibility, if you need to move for work, or want to rent a different property.

The downside of owning

All costs are your responsibility

Owning a home forces you to have a larger emergency fund than renting. If your appliances break, if your roof is leaking, or if your furnace conks out—all expenses will be covered by you, out-of-pocket.

Loss of flexibility

When renting, you’re free to move as soon as your lease it up, which makes moving quick and relatively painless. When you own, you’re locked in with a mortgage; it’s more work and money to list your home and possibly break your mortgage.

While you do have the option of renting out your home if you want to move, it can also be a huge hassle. Not only do you have to attract and find a perfect tenant, but you will also have to continue to deal with home maintenance, along with rental payment collections and tenant issues.

Transaction fees

If you buy and sell homes on a regular basis, you’ll be paying a lot of transaction fees which could make buying not worth it. These include land-transfer tax, real estate agent fees, closing costs, and lawyer’s fees, to name a few.

Long story short: If you’re someone who moves every 1–3 years, or can’t envision living at a property for a long period of time, owning is likely not the right decision for you in the short-term.

Big debt load

Your mortgage is likely the largest debt you’ll ever take on. Some people don’t deal well knowing they have debt, so buying with a mortgage is not for everyone.

The benefits of renting


When you rent a place, you’re getting exactly what you want when you want it. You can move to fit your life—upgrading to a bigger place or moving closer to work—with relative ease. You can move as often as you want with minimal costs.

Invest in the real estate market without owning

You do have the opportunity to invest in real estate without owning a house you live in. A real estate investment trust (or REIT for short) is a balanced form of investment in the market. You can choose how much or little you invest, and it doesn’t have to be limited to a region and style of home, as it would if you owned.

Invest how you want

If you’re not forced to invest your money in your home, you can invest it anywhere else—if not in a REIT, then in mutual funds, GICs, ETFs, or individual stocks.

The downside of renting

You can be told to leave

When you own, you know you’re in control to make the decision to stay or go. When renting, you give that power to your landlord, who can evict you if he or she decides to move back into the home, or sell it. While you have the ability to move at your own will while renting, you can also be told to move at an extremely inconvenient time.

You don't have control over the aesthetic of contents of your home

A landlord doesn’t have much incentive to upgrade your rental. As long as appliances are working, and the structure is keeping you safe, your landlord can turn a blind eye to an old fridge or peeling paint.

Paying rent forever

If you stick to renting, you’ll be paying rent for the rest of your life; there’s no relief down the line as there is with homeownership. Rental payments also go up over time, so in your later years when most adults have less income, you’ll be paying even more in rent.

The Home Buying Process

1. Choosing an Agent

Picking the right real estate agent is crucial to making your home search a success.

Your agent should be experienced, full-time, and always put you first. Your agent should consistently search for new listings to show you, act as a voice of reason while giving you advice, and expertly negotiate to get you the best deal.

You should interview potential agents and ask about their experience and service, and obtain references from previous clients. Once you’ve chosen an agent, sign a buyer’s representation agreement to get started.

Lux Tip!

Buyer’s Representation Agreement, also known as a BRA, the Buyer’s Representation Agreement, is a contract between the buyer and the agent that they hire to exclusively represent them. Once under contract, your agent is legally bound to follow your instructions, maintain confidentiality, and provide their honest opinion and advice.

2. Research and Plan

Research what you need, want, and can afford—from your housing costs to closing costs. Consider your current budget and lifestyle, and how they might change in the next five years.

Things you should consider:

  • Your ideal home

  • Your preferred neighbourhood

  • Your budget

  • Your savings for your downpayment

For more information, check out our page on saving and sourcing a down payment.

Work with your agent to:

  • Walk through the process so there are no surprises

  • Determine your future needs

  • Discuss neighbourhoods and housing types that meet your needs and maximise return on investment

  • Connect you with a reputable mortgage broker

You'll want a mortgage broker early in the home buying process. They will help you by:

  • Giving you a pre-approval with the maximum home price you can afford

  • Locking in an interest rate for 90–120 days

  • Helping you get the mortgage that best meets your needs

Head to our mortgage centre for even more in-depth information—from getting pre-approved to mortgage terms and conditions.

3. Find a Home

Based on the criteria you gave your agent, they will hand-select homes for you to view. While you should see homes quickly, as they can be scooped up in popular neighbourhoods, you should also be viewing homes carefully to determine whether or not they suit your needs. Also, keep in mind that listing photos can be deceiving, so viewing them in-person is very important.

Spend time in neighbourhoods you’re considering, to be sure they’re right for you. View all homes that your agent has suggested, based on the criteria you’ve given them, because your agent has more experience viewing homes and can find hidden gems that will surprise you.

For more information, including specifics on buying condos and pre-construction, read our guide on finding your home.

4. Make an Offer

When making an offer, there are many terms to consider. For competitive markets you will need to be strategic about which conditions to include, and you may need to move quickly to submit an offer. Having a plan can help you be prepared to negotiate on your terms.

While making an offer, you have to:

  • Name your price and terms

  • Understand your current and future financial position

  • Be ready to make a firm offer when required

Your agent will:

  • Analyze comparable properties with you

  • Work with your mortgage broker on a financing plan and risk assessment

  • Advise you on how to reach your desired outcome in the current market

  • Present your offer to the listing agent or seller

  • Negotiate the best deal for you

Your mortgage broker will also confirm whether you can get financing for your chosen property and price.

Read on for more information on making an offer, including negotiations, conditions, home inspections, and bidding wars!

5. Closing the deal

The final steps can be overwhelming and tedious but they are important and time-sensitive. Each person plays an important role, including your real estate lawyer.

You will:

  • Visit the home a few days before close for a final inspection

  • Purchase home insurance

  • Sign legal documents

  • Pay closing costs and down payment (less deposit) via your lawyer

Your agent will:

  • Arrange and attend your final home visit

  • Help you arrange insurance, lawyers, movers, utilities, cable, and anything else you need

  • Handle any issues that may come up that risk closing

  • Begin planning your budget for monthly carrying costs

Your mortgage broker will:

  • Discuss mortgage insurance options

  • Remit mortgage money to your lawyer

Your real estate lawyer will:

  • Explain legal documents to you

  • Conduct title search and purchase title insurance on your behalf

  • Handle fund transfers

  • Register the property in your name and hand you your keys!

Read on for a run-down of closing costs, from interest adjustment to land transfer tax.