Maya and Chris are considering a $620,000 condo. They have enough saved for a 20% down payment, comparable rent is $2,350 per month, and there is a real chance one of them will relocate for work within five years. Friends keep saying rent is “throwing money away.” The spreadsheet tells a more interesting story.
Why a five-year clock changes the math
Many rent-vs-buy comparisons lean on a long holding period. On a five-year timeline, transaction costs, early principal payoff, and forced-sale risk show up clearly. The hidden cost is often not rent—it is owning an illiquid asset on a short clock. For a longer-horizon walkthrough with different assumptions, see Rent vs Buy: A Real Scenario Walkthrough with Numbers.
Their numbers
- Home price: $620,000
- Down payment available: $124,000 (20%)
- Starting mortgage balance: $496,000
- Mortgage rate (5-year fixed): 5.5% nominal, monthly payments
- Amortization: 25 years (300 scheduled payments)
- Holding period for this comparison: 5 years (60 monthly payments)
- Expected home appreciation: 3% per year
- Monthly ownership cost: $3,200 (mortgage payment + property tax + insurance + condo fees + maintenance reserve)
- Comparable rent: $2,350/month → ownership premium over rent: $850/month
- Renter investment return: 6% per year (down payment compounded annually; $850 contributions at month-end with monthly compounding at 6% ÷ 12)
- Sale costs if they buy: ≈5.5% realtor commission plus ≈$3,000 legal/misc
Under those mortgage assumptions, the scheduled monthly principal-and-interest payment is about $3,046. That payment sits inside the $3,200 all-in ownership cost; the rest covers tax, insurance, condo fees, and a maintenance reserve.
If they buy: home value after 5 years ≈ $719,000 ($620,000 × 1.03⁵). After 60 payments, remaining mortgage ≈ $443,000 and principal paid ≈ $53,000. Gross equity ≈ $276,000. After realtor commission (≈5.5% of sale price ≈ $39,500) and legal/misc costs (≈$3,000), net proceeds ≈ $233,500. Cash put in along the way: $124,000 down payment plus the $850/month ownership premium × 60 months = $175,000 of cash outlay (not the same as ending wealth).
If they rent: the $124,000 down payment, invested at 6% compounded annually, grows to about $166,000. The $850 month-end difference, invested for 60 months at 6% compounded monthly, adds about $59,300. Total liquid assets after 5 years ≈ $225,300.
Buying finishes about $8,000 ahead—roughly 4% of the renter’s ending pile, or less than one calm investment year. Ownership still looks slightly better on paper, but only if they complete a calm sale. The margin is thin enough that a soft market or rushed listing can erase it.
When the move date is not theirs to choose
The comparison above assumes a calm sale in year 5. A job relocation is not always calm. If an offer arrives in month 48 instead of month 60, they lose another year of equity buildup. If the market is soft when they list, they may accept a lower price or sell under pressure.
A renter in the same situation gives notice and moves. No rushed appraisal, no pressure to price aggressively, no “sold in 30 days for $15k less than asking” regret. That flexibility has value even if it is hard to put in a cell.
Buying fits when the horizon is truly certain. It gets fragile when “five years” really means “five years, give or take twelve months,” or “probably five years unless something changes.”
How they worked through the decision
First they lined up actual cash outflows. Buying needs the down payment, closing costs, mortgage, condo fees, tax, insurance, and maintenance. Renting leaves the down payment free to invest, and the monthly ownership premium over rent can be invested too—if they actually do it.
Then they matched the model to the real timeline. Fifteen years might give buying enough time to overcome transaction costs. Their real question was five years. Equity has less time to build, and selling costs weigh more.
They tried a stronger appreciation assumption. Buying improved, but not enough to create a comfortable margin inside five years. The shorter timeline—not one tiny input tweak—was still the main driver.
They also named the lifestyle layer. Ownership still appealed, but so did the ability to move for work without selling under pressure. The model did not decide their life; it stopped them from pretending the move risk was not there.
Finally they stress-tested: lower appreciation, higher maintenance, slightly worse selling costs. None of those assumptions were extreme. Together they widened the gap against buying. The plan was fragile in exactly the place they already knew was uncertain: time.
What they decided—and what would reopen it
They keep renting for now, keep the down payment invested by timeline (near-term housing money safer; longer-horizon money invested more carefully), and revisit buying when a longer stay looks likely. That is not anti-homeownership. It is matching the asset to the chapter.
The renter advantage only holds if the saved cash and monthly difference are actually used well. If the difference disappears into lifestyle creep, renting loses one of its strongest financial arguments.
A longer stay, lower purchase price, lower mortgage rate, much faster rent growth, or a stronger personal value on ownership could all move the result. They set three review triggers: expecting to stay at least eight years, comparable rent rising materially faster than ownership costs, or enough income growth to buy without draining liquid savings. That keeps the decision open without re-litigating it every month.
They also put a rough value on flexibility. If moving for work could raise income or reduce stress, selling a condo under pressure could cost more than the transaction fees alone. Renting, in this chapter, is keeping options open—not a failure to commit.
When they revisit, they will rerun the same inputs rather than start from a slogan. If rates fall but prices rise, or rent growth slows while career plans get less certain, they can see the full tradeoff instead of cherry-picking whichever change supports the answer they already want.
Try it yourself
Use the Rent vs Buy Calculator, then read the Rent vs Buy Guide for the broader path. If they later buy with a federally regulated lender, mortgage qualification may also depend on a minimum qualifying rate (stress test)—confirm the current framework with OSFI and the lender.
To test how a shorter or longer stay changes this result, use the rent or buy Money Lab.
Primary sources
OSFI’s minimum qualifying rate page for Canadian mortgage stress-test context. Purchase prices, rents, and returns in the story are hypothetical.
Disclaimer: Educational example only — not financial, tax, or real-estate advice. Local transfer taxes, lender rules, and markets vary. Confirm current mortgage qualification requirements with your lender and regulators.