Buying Beats Renting: A Full Cost Breakdown

In 2025 it is better to buy a home than to rent, and the numbers show it. I am Moe Asgarian, a senior real estate broker in Toronto, ranked number 47 worldwide at RE/MAX. In this article I will compare the full cost of buying versus renting a one bedroom condo in downtown Toronto, and show you a method you can use in any market to decide for yourself.

First, buying is not always the right move. Sometimes the numbers say renting is better. This is not my personal opinion, it is something you can calculate for any scenario. Picture a one bedroom condo downtown where we know both the purchase price and the rent.

The rental side

Let us say the rent is 2,300 dollars a month. Over a year that is 27,600 dollars to rent this condo. Internet, electricity, and insurance are about the same whether you rent or own, since tenant insurance and homeowner insurance are close, partly because the condo has its own building insurance through the maintenance fee. The key point about rent is simple: all of it is unrecoverable. The full 27,600 dollars a year is money you do not get back.

The cost of buying

Now to buy the same condo, the price is around 500,000 dollars. The maintenance fee I will put at 450 dollars a month, and property tax at about 150 a month, which is the annual tax divided by 12. Land transfer tax on this condo is about 13,000 dollars, but if it is your first home you get an 8,000 dollar rebate in Toronto, bringing it to roughly 4,500. Lawyer fees are about 1,500. With 15 percent down you need about 75,000 dollars up front. At a 4 percent rate with a 25 year amortization, the mortgage payment comes to about 2,298 dollars a month. Add the 450 fee and 150 tax and the total cost of ownership is 2,898 a month, about 600 more than renting the same place.

Why the 600 dollar gap is misleading

Here is the important part. A mortgage payment has two pieces: interest and principal. In year one, most of it is interest. In this example, of the 2,298 dollar payment, about 1,428.66 is interest and 869.34 is principal. So over the first year about 10,434 dollars of your payments go to principal, which you are saving, like a savings account at the bank. About 17,140 over the year goes to interest, which never comes back. The unrecoverable costs of owning, interest plus condo fee plus property tax, add up to about 24,343 dollars in year one. Compare that to 27,600 dollars of fully unrecoverable rent. So even though you pay a bigger number to own, part of it comes back to you.

Run the formula yourself

One note on this scenario: I assumed the home does not appreciate through 2030 and that rents do not change. If either one moves, the math shifts, but these two numbers usually rise together. Use this same formula wherever you are deciding to buy or rent. And remember, if you put 20 percent down you no longer need a 25 year amortization tied to CMHC insurance, you do not add insured mortgage costs to your balance, you get a better rate, and your monthly payment drops a lot. Note also that I am speaking to the end user here, the person choosing between renting and buying to live in. Investing is a different story, and I have other articles on that.

A real example

Let me make it concrete. We listed a detached home in Aurora at 1,019,000 dollars. It has a one bedroom basement apartment and three bedrooms upstairs. Together, upstairs and down, we can rent it for about 5,000 dollars, which actually beats the mortgage cost if you put 20 percent down, and the property tax on that home is about 478 a month. So roughly the 5,000 you collect in rent matches the cost of holding the home. The bonus is that each month part of your mortgage payment goes to principal, which lowers your balance, like saving into your own account. If you'd like a straight answer for your own situation, fill out the form below and book a free consultation. Stay well and take care.