Highlights:

• The advice that ‘buying is always better’ isn’t always true
• It’s possible to be just as wealthy - or wealthier - from renting instead of buying
• Get the free tool that calculates the true cost of owning VS renting

We’ve all heard that renting is “throwing money away” and owning a home is the sure path to wealth.

However, this advice doesn’t fit all situations - and in some cases, is just plain wrong.

There are many variables involved, so you’ll want to look at the numbers for your particular situation before making a decision.

The numbers are important, but buying or renting isn’t just a financial decision. We’ll also cover the real-life factors that influence what’s right for you.

I own, but not for financial reasons

Listen, I’m a homeowner myself - even though we know renting would be better financially.

Owning is worth it for us because of the lifestyle and emotional benefits.

Ultimately, it’s about it making a decision you’re happy with, and one that aligns with your priorities.

Let’s look at all sides of this decision to help you figure out what’s best for your situation!

“Buying is always best” isn’t true anymore

It’s a message passed down from parents who bought homes in the 1980s, 90s, or early 2000s.

Things were different then. Wages were higher relative to housing prices, and double-digit returns on real estate were common - and you shouldn't count on that in the future.

As advisor Robb Engen says,

“We can’t go back in time and buy a house in 1984, or even 2004. Aspiring homeowners need to buy at today’s prices, which are exceedingly unaffordable.”

Today’s first-time buyers face sky-high prices and stagnant incomes.

And while many parents urge their kids to buy - often using personal anecdotes of skyrocketing appreciation - the math doesn’t always hold up now.

Just like this response to Benjamin Felix’s article, Renting is often a better deal than buying. That’s because of how expensive it is to own a home:

Ben points out that if someone bought a home for $40,000 in 1974 and sold it for $2 million in 2024, they’d be sitting on a tidy sum - getting about an 8.2% annual return.

Not bad, but over the same time period, the S&P 500 returned closer to 12%.

In other words: housing may feel like a winning investment, but other options have quietly outpaced it.

What the numbers actually say

A recent study by Bankrate found that it’s cheaper to rent than buy in the 50 largest U.S. metros.

According to Bankrate, the average mortgage payment in 2025 is 38% higher than rent, and in expensive markets like San Francisco or Seattle, that gap stretches to nearly double or more.

There are a few locations that have a smaller gap between the price of buying and renting. Owning might be worth it if you plan to live in that home for years.

But as a general trend, the data shows that high mortgage rates, insurance costs, and home prices have made ownership less accessible for many.

“It can often be a better financial decision to rent than to own,” says Ramit Sethi. “Equity can be good, but it comes with its costs.”

Is equity an illusion?

The idea of building equity is often used to justify buying a home, but in the video The Housing Market is Bankrupting Americans, Ramit shows how the benefit of equity can be misleading.

“A lot of people don't realize this, but most of your mortgage payment goes towards interest for the first 20 years,” he explains.

“That equity you thought you were building is highly exaggerated for the first two decades of owning a house.”

Plus, since equity is locked in your home, it’s not easily accessible without complicated financial maneuvers. You can’t use that money for anything else.

Renting looks surprisingly favourable

In this video that breaks down 20 years of rent vs. own data across 12 Canadian cities, Ben Felix admits “I was surprised by the results. I was expecting renting to look terrible, and it actually looks great.”

In 7 of the 12 cities, renters accumulated more wealth than owners over the full 20 years.

He also split the data into five-year periods. Across those 48 time windows, renters won 71% of the time - as long as they invested the difference between rent and the total cost of homeownership.

The housing market has had good returns - but so has the stock market.

Source: 20 Years of Renting vs. Buying a Home in Canada (2005 to 2024)

You have to look at all the numbers to get the real picture

People get caught up comparing the monthly cost of rent versus what they’d pay for a mortgage.

But that’s far from the full picture. Owning a home comes with a lot of ‘hidden costs’ beyond the mortgage.

“Phantom costs like maintenance and taxes and repairs can often add 30 to 50% on top of your mortgage, making home ownership way more expensive than people expect,” explains Ramit.

Owners can expect to pay between 1-3% of their home’s value just on yearly maintenance costs, depending on factors like age, location, and property type.

At 76 years old, our home is older and we consistently spend 3% of the value on yearly repairs. Even though we expect it, it still stings.

Plus the opportunity cost

If you’re renting, the money you would’ve spent on a down payment and closing costs can be invested instead.

Let’s see what could happen if that money were invested in a well-diversified low-fee portfolio like we cover here.

Historically, that money would have a better return if it were in the stock market instead of being tied up in real estate.

Ben shares the numbers: “An average apartment in Toronto cost $198,300 in January 2005 and $602,700 in December 2024. That's an annualized return of 5.74%...

A portfolio consisting of 30% Canadian stock index and 70% global stock index returned an annualized 8.62% over the same period.”

When buying makes sense - and when it doesn’t

Whether you live in a major city or outside a metropolitan area makes a major difference.

CPA Canada looked at 2 scenarios comparing buying VS renting:

Living in a city

Buying a home in Montreal’s South-West costs about $794,500. You’d need a $54,450 down payment and pay around $4,260 per month, not including extra costs like insurance, maintenance, and taxes. After 25 years, the home could be worth $1.66 million if it grows 3% annually.

Renting a two-bedroom in the same area costs about $1,950/month. If you invest the down payment and the $2,310 monthly savings at a 4.5% return, you could have $1.94 million in 25 years - roughly $271,000 more than if you’d bought.

➜ In this scenario, it’s better financially to rent.

Living outside a metropolitan area

Buying a single-family home in Drummondville costs about $345,000. With a 5% down payment and mortgage insurance, your monthly payment would be around $1,887 (excluding taxes and upkeep). If the home’s value grows 3% annually, it could reach $722,000 in 25 years.

Renting costs about $1,055/month. If you invest the savings and upfront costs with a 4.5% return, you’d have around $704,000 after 25 years - about $18,000 less than the home’s value.

➜ In this scenario, renting is better in the short term. Buying only pulls ahead financially if they stay in that same home for about 15 years.

And if the interest rate is higher, like 7–8%, the numbers shift even more in favour of renting.

With a 7% annual return on your invested savings, you'd end up with over $1 million after 25 years - far surpassing the $722,000 home value.

In that case, renting and investing the difference could leave you hundreds of thousands of dollars ahead, even over the long term.

There’s more to housing than just numbers

Where and how you live affect your entire life.

Finances are important, but it’s only part of the picture - there are emotional benefits both ways you can’t put a price tag on!

At the end of the day, it’s a deeply personal decision.

We happily own a house, even though we knew it would be better financially to rent. The emotional upsides for us outweigh the financial gain.

Knowing the realities of both renting and buying can help you choose what’s right for you.

Owning your home has benefits

Stability: You’re not at the mercy of landlords, sudden rent hikes, or eviction

Freedom: Want to renovate the kitchen or put in a pool? It’s your call

Pride: For many, homeownership feels like a milestone and helps them celebrate that they “made it”

But also trade-offs

Responsibility: When the furnace breaks, the cost is all on you

Stress: Property taxes rise. Roofs leak. Renovations go over budget. Constant maintenance.

Risk: If you stretch your budget to buy, you may become “house poor,” with little left for savings, travel, or fun

Time: Just doing routine maintenance around the home takes a lot of time. I had much more free time to myself when I was renting

Renting offers a different kind of freedom

Flexibility: Move cities, downsize, or try a new neighbourhood with less hassle

Simplicity: No surprise maintenance bills or mortgage rate renewals

Cash flow: You may have more money left to save, invest, or enjoy life

As financial planner Shannon Lee Simmons told The Globe and Mail, “I would rather somebody rent affordably and double down on savings than be house poor.”

But renting isn’t perfect

Rents can rise: And according to Ben Felix, over time “owning tends to look better than renting in cities with the fastest rent growth.”

Eviction or instability: This stressor can hang over your head. Especially if you have kids, you might want more stability so you don’t have to worry about moving, changing school districts, or disrupting their routine

Lack of control: You might be limited in how much you can personalize the space. Plus, some people find it hard to create long-term plans with only year-long leases. It’s hard to move unexpectedly!

Use a rent VS buy calculator

It’s best to look at the numbers on a case-by-case basis so you can see the real numbers.

Just because you live in a certain area doesn’t automatically mean buying or renting is the better choice. Seeing the numbers can help you make a decision.

These calculators also show the phantom costs of owning beyond just the monthly mortgage payment, so you get a far more accurate breakdown of what you’d be spending.

“You’ve got to know your numbers because this is the biggest purchase you will ever make,” emphasizes Ramit Sethi. This is “the biggest financial decision of your lives.”

🇨🇦 Rent VS Buy Calculator from PWL Capital

🇺🇸 Rent VS Buy Calculator from Schwab Moneywise

Calculator from PWL Calculator

What you do with the money is key

Almost all the rent vs. own studies agree on one thing:

Renting is only financially comparable (or better) if you invest the savings.

If you rent and spend the difference, buying will almost certainly leave you better off in the long run.

But if you rent and consistently invest the down payment, monthly cost gap, and tax savings into a low-fee, diversified portfolio you can end up just as wealthy, if not wealthier, than homeowners.

The challenge is staying disciplined. Unlike mortgage payments which are automatic, investing takes intention. That’s where automation can help.

Whether you rent or own, investing is essential

Whether you buy real estate or not, investing helps you build wealth for retirement.

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