Rent or buy: How to decide?

Updated: Nov 30, 2019

Is there a smart way of making the decision to rent or buy your home?

There is actually. And at Only With, we’ve helped thousands make the right move. Quite literally.

So, if you are a recent graduate, new to the job market, or ready to expand your family, chances are sooner or later, you’ll face this decision to buy or rent your first home. Deciding which is better in the GTA housing market isn’t as black and white as it might seem. And how to do it smartly – that’s a whole other story.

You’ve probably heard that renting is like flushing money down the drain, or buying a house is one of the wisest investment decisions you’ll ever make. However, the reality is – there isn’t one right answer for everyone.

Buying or renting will largely depend on your individual situation, your income, affordability, budget, the area of preference, market dynamics, and many countless other factors. But one of the biggest ones is assessing how much house you can actually afford and what is, ideally, your maximum housing payment.

Real estate industry experts agree that you should be spending a fixed percentage of your income on housing.


Mortgage lenders and financial advisors recommend that you spend about 30% of your gross monthly income (before taxes) on housing. So, if you’re making about $4,000 per month, your rent or mortgage payment should $4,000 x 0.3, or about $1,200.

However, as a recent graduate or a new family, you might be carrying an additional debt load, which should also be factored into determining your monthly housing expense.

According to personal finance experts from Money Under 30, these three simple rules are recommended for calculating how much house you can actually afford.


This rule of thumb for determining how much home you can afford is similar to the 30% rule I referred to earlier, but this one looks at your situation at a more granular level and is borrowed from the mortgage industry.

Your monthly mortgage or rent payment should not exceed 28% of your gross monthly income (again, the amount before taxes). So, if your family’s combined annual income is $80,000, your mortgage payment should not exceed $1,866.


This next rule factors in all other housing payments, aside from rent and mortgage amounts. If you are considering rent, factor in the security deposit, move-in fees, broker fees, utilities, and insurance. If you are considering buying, including homeowner’s insurance, closing fees, property taxes and other expenses that are added to your rent or mortgage base.

Your total maximum housing payment should not exceed 32% of your gross monthly income. That means, for the same couple making $80,000, your total monthly housing payment should not be more than $2,133 per month.


Last but not least, this final rule looks at your entire debt load as a family holistically. To calculate your ideal monthly housing payment, factor in your auto loans, student loan payments, and minimum credit card payments – the sum of which should not exceed 40% of your gross monthly income.

This means that the above couple with an income of $80,000 should not exceed $2,667. If, for instance, your lease payments are around $850 per month for two cars, your monthly mortgage or rent payment would be capped at $1,867.


Once you have a good idea of how much you can afford, now it’s time to take a look at the current housing market for both renters and buyers.


According to May 2019 Canadian Rent Report from Pad Blogger that analyzes hundreds of thousands of active listings across Canada, as expected, the average rental prices for one and two-bedroom condos are all over the map for different areas in the GTA and across Canada.

  • For example, one-bedroom units in Toronto are currently going for $2,242, on average, for the month of May. Two-bedroom condos are around $2,731 per month.

  • In Richmond Hill, the current rent for a one-bedroom condo is at $1,874, and a two-bedroom is at $2,312.

  • In North York, a one-bedroom condo is on average will cost you $1,794 and a two-bedroom one is going for $2,264.

  • On a provincial level, Ontario lists the highest rental rates in April 2019, with landlords seeking $2,189 per month on average on all property types, compared to New Brunswick, for example, with an average asking rent at $783 – the lowest across all provinces.

So, what does that mean? Considering that the rental rates declined in the first few months of 2019, following the increase in late 2018, Canada’s economists predict that the mortgage rate increases in 2019 will finally pause. The impact may actually spur some tenants to shift gears and jump into the buying vs renting market. In fact, according to Ipsos reports, one in three Canadians - 32% - are now considering a home purchase. This is likely due to a more positive economic outlook. So what’s the outlook?


Well, according to TREB Market Year in Review & Outlook Report 2019, the average home price in the GTA is around $820,000.

A 2018 Ipsos survey found that the majority of recent home buyers purchased a detached home, however that number is lower comparing to the previous year. This dip can be attributed to more affordable home types, such as semi-detached, townhomes, and condos.

On average, a purchase price for a detached home in 2018 was $1,009,535. Semi-detached sold for $780,777, townhomes sold for $637,757 and condos were around $552,423 in 2018.

Now, what can we expect for 2019 and onwards?

Taking a closer look at housing prices across various cities in the GTA, the averages are different depending on the area, according to Zolo market trends report.

  • In King City, the average price for a house is at $1.5 million.

  • In Richmond Hill, it sits around $966,000.

  • In Aurora, the average price is around $890,000.

The two graphs below from TREB, show another view of 2019 average housing prices by home type – comparing Toronto and the rest of the GTA.


The simple answer is no.

As I mentioned earlier, everyone's situation is different and your decision should factor in everything under the sun: not only your income, affordability, and budget, but also your personal preferences, values, and lifestyle.

Let’s take a look at some of the benefits for both categories:


  • Lower fixed monthly costs, compared to owning a home (depending on the area)

  • Invest what you save, since you’re paying a lower monthly payment

  • Enjoy the benefits of rent control with a dependable monthly payment (if and when applicable)

  • Take advantage of a mobile lifestyle, if that suits your needs, and enjoy the ability and freedom of moving

  • No need to worry about paying a down-payment

  • Yet it enables you to save for a down-payment while renting

  • Eliminating worries about maintenance and repair responsibilities -– your landlord will be responsible for the majority of repairs


  • You are in the possession of a real-estate investment

  • With home ownership, you gain equity - paying the principal is like depositing money in the bank

  • You can customize, personalize and modify your living space to suit your needs and lifestyle

  • You can enjoy social benefits as a result of staying in one home/one area for longer periods of time, which often results in developing a sense of community, friendship with neighbors and consistent educational opportunities for children

  • You have complete privacy if you own a house

  • Homes typically increase in value over time

  • Your costs are predictable and more stable than renting if based on a fixed-rate mortgage

  • The interest and property tax portion of your mortgage payment is a tax deduction

  • Enjoy the pride in home ownership, which often is one of the most rewarding experiences in life


At the end of the day, the decision to buy or rent is yours and mainly depends on your personal circumstances. However, an experienced real estate agent can help you weigh your options, assess your financial situation, educate you on the pros and cons of each, and help you alleviate the pressures and complexities of the process.

At Only With, we take pride in the fact that we've helped thousands of people make the right decision because each one of our agents understands that finding the right property, whether to rent or buy, really means finding a place that you can call home - that feels secure, comfortable, and in-sync with your lifestyle.

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