What owners pay and don’t get back
Only the part of a mortgage payment that pays down the loan builds wealth. In the early years, most of each payment is interest:
| Part | Amount |
|---|---|
| Mortgage interest | $24,713.98 |
| Property tax | $5,600.00 |
| Maintenance and repairs | $7,000.00 |
| Paying down the mortgage (yours to keep) | $12,479.42 |
| Cost of owning in the first year | $49,793.40 |
Interest, property tax (0.8% of the value) and upkeep (1%) come to about $3,109 a month that you don’t get back, like rent. Home insurance, condo fees, the return the $140,000 down payment could have earned, and the costs of buying and selling would add more.
| Cost | Roughly, each year |
|---|---|
| Mortgage interest | Most of each payment in the early years |
| Property tax | Often 0.5% to 1% of the value |
| Maintenance and repairs | Often 1% or more of the value |
| Home insurance, condo fees | Varies |
| What the down payment could earn | The return you give up by not investing it |
Buying also has big one-off costs: land transfer tax (on a $700,000 home, from $750 in Alberta to $20,950 in Toronto), legal fees, and CMHC insurance if you put down less than 20%. Selling costs more again, mostly the real estate commission. See land transfer tax by province.
The 5% rule of thumb
A quick comparison: the costs of owning that you don’t get back come to roughly 5% of the home’s value a year: about 1% property tax, 1% maintenance and 3% for the cost of the money tied up, through mortgage interest or the investment returns you give up on your down payment.
Example: a $700,000 home
5% of $700,000 is $35,000 a year, or about $2,900 a month. If you could rent a similar home for less, renting may cost less, as long as you invest what you save.
It’s a rough guide: prices, rents, property tax rates and mortgage rates vary a lot between Toronto, Calgary, Halifax and everywhere else. Use your own numbers in the rent vs buy calculator.
What makes Canada different
- No tax deduction for mortgage interest on the home you live in, unlike in the US.
- Tax-free gains when you sell. The principal residence exemption usually makes the gain on your main home tax-free, which helps owners when prices rise.
- Renewal risk. Most Canadian mortgages have a term of 5 years or less, so your rate is reset when you renew, and your payment can jump if rates are higher.
- Renters can still use the tax breaks. A TFSA grows tax-free, and an FHSA can be moved into your RRSP if you never buy.
- Rent rules vary by province. Some provinces limit how much rent can rise each year for existing tenants, and some don’t, so check the rules where you live.
When buying makes more sense
- You’ll stay for years, long enough to earn back the costs of buying and selling.
- You want stability: no rent increases or being asked to move.
- You’d never invest the difference. Paying down a mortgage is a forced saving plan, and that’s a real benefit.
Bottom line
Rent pays for a home to live in, just as an owner’s interest, property tax and upkeep do. Compare the full costs, not rent against the mortgage payment. The rent vs buy calculator compares the two over the years you’d stay, and the affordability calculator shows how much you could borrow.