Table of Contents
Toronto Market Snapshot (January 2026)
$2,612
Avg 2BR Rent
CMHC Oct 2024
$1.1M
Avg Home Price
TRREB Dec 2025
4.5%
5-Yr Fixed Rate
Major Banks
3%
Vacancy Rate
CMHC 2025
1TL;DR — The Bottom Line
Quick Decision Framework
Buy if you plan to stay 5+ years
Transaction costs (land transfer tax, legal fees, realtor commissions) typically require 4-6 years to recover through equity building.
Rent if you'll move within 3 years
Selling costs (~5%) plus land transfer tax (~4%) mean you could lose $50,000+ on a short-term purchase.
Break-even: typically 3-6 years in Toronto
Depends heavily on down payment size, interest rates, and home appreciation assumptions.
2The True Cost of Buying in Toronto
Most rent vs buy calculators oversimplify. Here's what you actually pay when buying a home in Toronto:
Upfront Costs (Due at Closing)
| Cost Item | $700K Condo | $1.2M House |
|---|---|---|
| Down Payment (20%) | $140,000 | $240,000 |
| Ontario Land Transfer Tax | $10,475 | $20,475 |
| Toronto Municipal LTT | $10,475 | $20,475 |
| Legal Fees | $2,000 | $2,500 |
| Title Insurance | $500 | $700 |
| Home Inspection | $500 | $600 |
| Total Upfront | $163,950 | $284,750 |
First-Time Buyer Rebate
First-time buyers may receive up to $4,000 provincial LTT rebate and $4,475 Toronto LTT rebate (total $8,475). This only fully covers homes up to $368,000 — minimal impact in Toronto's market.
Monthly Costs (Homeownership)
| Monthly Cost | $700K Condo | $1.2M House |
|---|---|---|
| Mortgage Payment (4.5%, 25yr) | $3,090 | $5,297 |
| Property Tax (~0.65% annually) | $379 | $650 |
| Condo Fees / Maintenance | $650 | $400 |
| Home Insurance | $100 | $200 |
| Utilities (heat, hydro, water) | $100 | $350 |
| Total Monthly | $4,319 | $6,897 |
3The True Cost of Renting
Renting appears simpler, but there are still costs and considerations to account for:
1BR Apartment
2BR Apartment
Rent Increase Guidelines (Ontario 2025)
Ontario's rent increase guideline for 2025 is 2.5% for most units built before November 2018. Newer buildings are exempt from rent control and can increase rent by any amount.
4Break-Even Analysis: When Does Buying Win?
The "break-even point" is when the total cost of buying equals the total cost of renting. After this point, buying becomes financially advantageous (assuming you sell).
Key Variables That Determine Break-Even
Home Appreciation Rate
Higher appreciation = faster break-even. Toronto historical avg: ~4-5%/year long-term.
Mortgage Interest Rate
Higher rates = more interest paid = slower break-even.
Down Payment Size
Larger down payment = less mortgage = faster equity building.
Rent Increase Rate
Higher rent increases = buying looks better over time.
Break-Even Timeline Estimates (Toronto)
| Scenario | Break-Even |
|---|---|
| Optimistic (5% appreciation, low rates) | 3 years |
| Moderate (3% appreciation, current rates) | 4-5 years |
| Conservative (2% appreciation) | 6-7 years |
| Flat market (0% appreciation) | 10+ years |
5Real Scenario: $700,000 Toronto Condo
Assumptions
Purchase Price
$700,000
Down Payment
$140,000 (20%)
Mortgage Rate
4.5% (5-yr fixed)
Comparable Rent
$2,600/month
Appreciation
3%/year
Rent Increase
2.5%/year
5-Year Comparison
| Metric | Buying | Renting |
|---|---|---|
| Total Housing Payments (5 yrs) | $259,140 | $167,700 |
| Upfront Costs Paid | $23,950 | $5,200 |
| Selling Costs (5% commission) | $40,600 | $0 |
| Equity Built (principal paid) | +$67,000 | $0 |
| Home Appreciation (3%/yr) | +$111,800 | $0 |
| Investment Return on Down Payment* | $0 | +$38,500 |
| Net Position After 5 Years | +$114,250 | -$134,400 |
*Assuming renter invests down payment equivalent at 5% annual return
Result: Buying wins at Year 5
With 3% annual appreciation, the buyer is ahead by ~$248,000 compared to the renter after 5 years (net position + equity).
6Real Scenario: $1.2M Detached House
Assumptions
Purchase Price
$1,200,000
Down Payment
$240,000 (20%)
Mortgage Rate
4.5% (5-yr fixed)
Comparable Rent
$3,800/month
Appreciation
3%/year
Rent Increase
2.5%/year
Result: Buying wins at Year 6
With the higher price point, transaction costs are larger ($40K+ in LTT), pushing break-even out by about a year compared to the condo scenario. However, appreciation on a larger asset accelerates wealth building afterward.
7Mortgage Stress Test Impact
Canada's mortgage stress test requires you to qualify at the higher of 5.25% or your contract rate +2%. This significantly reduces purchasing power.
What You Qualify For (Based on Income)
| Household Income | Max Purchase (20% down) | Max Purchase (5% down) |
|---|---|---|
| $100,000 | ~$550,000 | ~$475,000 |
| $150,000 | ~$825,000 | ~$700,000 |
| $200,000 | ~$1,100,000 | ~$950,000 |
| $250,000 | ~$1,375,000 | ~$1,200,000 |
*Estimates based on 25-year amortization, GDS 39%, TDS 44%. Actual amounts vary by lender and debt load.
8Opportunity Cost of Your Down Payment
One often-overlooked factor: if you rent, you could invest your down payment elsewhere. Here's what $140,000 (20% of $700K) could grow to:
$178,700
5 years @ 5% return
$228,000
10 years @ 5% return
$195,300
5 years @ 7% return
However…
Home equity builds tax-free (principal residence exemption), while investment gains are taxed. A $100K capital gain on your home = $100K in your pocket. A $100K gain on investments = ~$75K after tax (capital gains inclusion).
10When Buying Makes Sense
You plan to stay 5+ years
This is the most important factor. Transaction costs need time to be offset by appreciation and equity building.
You have a stable income and job security
A mortgage is a 25-year commitment. Job loss with a large mortgage can be devastating.
You want to build forced savings/equity
Mortgage payments are partly "forced savings" that build wealth. Many people don't have the discipline to invest the difference when renting.
You value stability and customization
Renovate, paint, own a pet, plant a garden — homeownership gives you control over your space.
11When Renting Makes Sense
You might move within 3 years
Career change, relationship change, or uncertainty about long-term plans — renting preserves flexibility.
You're in a rent-controlled building paying below market
If you're paying $1,800 for a unit that would rent for $2,500 today, you have a valuable asset. Don't give it up lightly.
You're disciplined enough to invest the difference
If you'll actually invest the $1,500/mo difference between renting and buying, you can build wealth either way.
You don't have enough for a 20% down payment
CMHC insurance (2.8-4% of mortgage) is a significant cost. Waiting to save 20% often makes financial sense.
12Data Sources
This analysis uses data from official Canadian sources:
- • CMHC Rental Market Report — cmhc-schl.gc.ca (October 2024 data)
- • TRREB Market Watch — trreb.ca (Monthly market statistics)
- • Bank of Canada — bankofcanada.ca (Interest rate data)
- • Ontario Ministry of Finance — ontario.ca (Land transfer tax rates)
- • OSFI — osfi-bsif.gc.ca (Mortgage stress test guidelines)
- • Statistics Canada — statcan.gc.ca (Housing price indices)
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