“Is it time to buy a home, or should I continue renting?” 


Look at how long you expect to live in your next residence, your ability to handle all the monthly payments associated with owning, and locations that might offer better value.

“Is it time to buy a home, or should I continue renting?” 


Early in the summer of 2020, I wrote about how the uncertainty of the COVID-19 pandemic had some home buyers reviewing their decision to jump into the housing market. After a quiet spring season, there’s been a resurgence in housing demand in markets across the country, with record-breaking sales noted for June and July. As Canadians return to the housing market, one of the biggest questions for prospective first-time buyers with an impending move remains: Should I continue to rent, or should I take the leap into home ownership? 

The answer to that question is, perhaps unsurprisingly, that it depends on your circumstances. The decision to move is often equally a lifestyle and financial decision, and it varies for each one of us based on our needs and preferences. Here are the key considerations to keep in mind as you navigate your own decision to buy or rent, along with some concrete examples on how to approximate and compare your financial costs in each scenario.

1. What’s your time horizon?

As you plan your move, it’s important to ask yourself how long you intend to live in your new home. The time horizon of your stay in that property is one of the key factors that should influence whether you choose to buy or rent.  

The general rule is that the longer you plan to live in the home, the more favourable the decision to buy becomes. Real estate is a long-term investment and there are real costs associated with buying and then selling a property in the short run. Although the Canadian real estate market as a whole has experienced a decades-long streak of positive appreciation, the thousands of dollars in transaction costs such as land transfer taxes, moving costs, and real estate professional and legal fees will eat into any appreciation and may not justify the financial investment involved over the short term, even in the most positive market conditions. 

If you plan to live in the same home for less than three years, it’s probably better to rent and avoid making what amounts to a speculative investment. If you’re planning to live in the home for at least five years, the decision to buy is likely better. If you anticipate needing to move again within the next three to five years, it might be a good idea to take a look at the broader financial aspects of owning and carrying a home, as they apply to your personal circumstances before moving forward. 

But how do you determine how long you’re likely to live in your new home? Your decision should be driven by your lifestyle needs, both today and in the future. For example, will the property you move into be able to accommodate an expansion or contraction of your family? Do you live in a neighbourhood with good schools and, if not, will this be important to you in the future? Do you expect changes to your daily commute? 

The goal is to choose a property and location that account for as many factors as possible, so you can limit the number of times you need to move, minimize financial churn associated with moving and maximize your investment return should you choose to buy. 

2. Take a closer look at your financial picture

Beyond having a down payment, it’s important that prospective buyers take into account two other financial aspects of home ownership: the monthly carrying costs of owning a home and, as I outlined above, the costs associated with selling that property in the future.  

When it comes to carrying costs, here are some of the key carrying costs that prospective buyers should account for: 

  • Mortgage payments 
  • Utilities
  • Home insurance 
  • Property taxes
  • Maintenance fees (if you purchase a condo) and/or repairs 

If you’re a renter looking to make a leap into home ownership, some of the costs outlined above will likely increase your monthly housing costs, and make a dent in your disposable income. That being said, with interest rates at historical lows, payment against your mortgage principal will likely account for more than half of these monthly payments, and you can think of that portion as forced savings and contributions toward building your net worth.

Recently, Zoocasa published a report reviewing condo apartment pricing trends in 35 Toronto neighbourhoods to understand which neighbourhoods may offer better opportunities for condo apartment buyers, and where it may be better to rent. Based on our analysis of Toronto’s neighbourhoods, here’s a look at the costs of renting and buying comparable condo units across three distinct areas of the city. While I’ve used specific examples, this is a helpful framework for any prospective buyer or renter to use as you research and plan your next move in your preferred location. 

3. Location should be part of your financial strategy

It may be better to rent than buy in Toronto’s downtown area

Let’s start by comparing two similar units in the same high-rise building in Toronto’s C01 (Downtown, Entertainment District, CityPlace, Liberty Village) neighbourhood. The first is a one-bedroom rental with a parking spot listed for $1,850 and the other is a unit for sale a few floors below with similar specs, listed at $579,900. Here’s how the some of the biggest monthly costs for the unit for sale break down with different down payments: 

Monthly costs with a minimum down payment (5.69%) on $579,900
Mortgage at 1.7% fixed rate; 25-year amortization $2,327
Property Tax $199
Maintenance Fees $359
Total $2,885
Monthly costs with a 20% down payment on $579,000
Mortgage at 1.7% fixed rate; 25-year amortization $1,898
Property Tax $199
Maintenance Fees $359
Total $2,456

In this specific instance, for someone who wants to live in this building, particularly a person on a shorter time horizon who is only able to make the minimum down payment, the rental may be more appealing or manageable.

Toronto’s east and west end offer opportunities for first-time buyers

Taking a similar approach, let’s have a look at properties in the east and west end. In the east end in E04 (Dorset Park, Kennedy Park), a good-sized two-bedroom unit with a parking was recently listed for rent at $2,400, with a similar unit listed for sale seven floors below at $449,000. 

Monthly costs with a minimum down payment (5%) on $449,000
Mortgage at 1.7% fixed rate; 25 year amortization $1,815
Property Tax $117
Maintenance Fees $820
Total $2,752
Monthly costs with a 20% down payment on $449,000
Mortgage at 1.7% fixed rate; 25 year amortization $1,470
Property Tax $117
Maintenance Fees $820
Total $2,407

In this case, prospective buyers who have saved up a sizable down payment may want to strongly consider the unit available for purchase, given that the monthly costs are comparable even with the addition of owner-specific fees and taxes. 

Although some units sell for higher than the list price, this is a useful exercise to help prospective buyers trying to research and understand their carrying costs across a few different neighbourhoods in the city. 

Finally, in W04 (Yorkdale-Glen Park, Weston), let’s compare a one-bedroom unit with parking listed for rent, and a larger two-bedroom unit with parking listed for sale at $330,000. Compared to the rental price of $2,205, here’s how the monthly carrying costs would compare for a prospective buyer: 

Monthly costs with a minimum down payment 5% on $330,000
Mortgage at 1.7%  fixed rate; 25 year amortization $1,334
Property Tax $70
Maintenance Fees $594
Total $1,998
Monthly costs with a 20% down payment on $330,000
Mortgage at 1.7% fixed rate; 25 year amortization $1,080
Property Tax $70
Maintenance Fees $594
Total $1,774

In this case, buyers with even the minimum down payment will want to strongly consider taking the leap into home ownership. In this case, given the historically low interest rates currently available, buyers should keep in mind that over half of their monthly housing cost would go toward their mortgage principal—meaning forced savings that help them grow their net worth. Those with a good amount set aside for a down payment will actually end up saving money on a monthly basis despite paying taxes and maintenance fees, and have a larger space, all while growing their net worth. 

The bottom line

Although I’ve highlighted very specific examples above, the same general approach can be applied to your own research, and adjusted based on whether you’re purchasing a freehold property or a condo. 

At the end of the day, there isn’t one silver bullet that I can share to help you make the decision that’s best for you. There are benefits to both buying and to renting and, ultimately, the choice must be carefully weighed and considered, keeping your lifestyle needs and financial picture at the forefront. However, a little effort and research can go a long way toward helping prospective home buyers find clarity as you prepare to make your next move.  

Lauren Haw is the CEO & Broker of Record at Zoocasa, a full-service brokerage that offers advanced online search tools to empower Canadians with the data and expertise they need to make more successful real estate decisions. View real estate listings at zoocasa.com or download Zoocasa’s free iOS app.

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