From 5% to 2%? Redditors unpack the rent vs. buy math after the mortgage is cleared

The replies to the post were split into two camps. Some of the most popular answers were also the shakiest, and the math behind both sides says a lot about how to judge what your home really costs you.

What does the 5% rule actually measure?

Benjamin Felix is a portfolio manager with PWL Capital, an Ottawa-based wealth management firm. He laid out the 5% rule in a 2019 PWL Capital post as a quick way to compare renting with owning. Instead of likening rent to a mortgage payment, he compares it to an owner’s unrecoverable costs, meaning money spent that never comes back.

Felix pegs property taxes at about 1% of a home’s value each year and maintenance at another 1% — the remaining 3% is the cost of capital. That covers interest on the borrowed portion plus the investment returns you give up on the money tied to the house.

To use the rule, multiply a home’s value by 5% and then divide by 12. On a $600,000 home, that’s $2,500 a month. If a comparable rental costs less, renting might be the better financial bet.

Does a paid-off home really drop to 2%?

Not quite, and that’s the catch in the Redditor’s question. The other 3% isn’t only interest. Felix notes that the cost of capital applies whether a home is financed through a mortgage or a down payment.

Once the mortgage is paid off, the whole house is equity, and that equity could otherwise be invested. Based on long-term return data, Felix estimates stocks have an edge of roughly 3% a year over real estate. Paying off a mortgage swaps an interest bill for an opportunity cost. It doesn’t erase it.

The number can drift lower, though. Felix suggests conservative investors, or those investing mostly in taxable accounts, might use something closer to 4% as a benchmark. Owners also get a tax perk. Under the principal residence exemption, the CRA generally doesn’t tax the gain when you sell your home.

Is a $2,500 mortgage really cheaper than $3,000 rent?

One of the most upvoted replies on the Reddit thread made the gut-level case for owning. “For me this was one of the biggest fallacies,” the user wrote. “I was paying 3000 cad per month as rent. I am paying 2500 as mortgage. I don’t see renting cheaper than owning.”

The commenter’s conclusion may well be right, but the comparison behind it is exactly the one Felix warns against. A mortgage payment includes principal, which is a form of savings. The commenter’s comparison also leaves out property taxes, maintenance, insurance and the returns the down payment could have earned elsewhere.

The missing piece of the equation is the home’s value. By Felix’s math, $3,000 a month in rent is roughly equivalent to owning a $720,000 home. If this Redditor’s home is worth less than that, owning it likely does beat their old rent. If it’s worth more, the $2,500 payment understates what they’re really spending.

That mortgage payment isn’t locked in for life, either. Canadian mortgage rates are typically only fixed for a limited term, often five years or less, before resetting at renewal. The Bank of Canada estimates that holders of fixed-payment mortgages with terms of five years or more who renew between mid-2026 and mid-2027 face average payment increases of about 15%.

The rest of the comment isn’t a math error, though. The user said owning feels “liberating” and brings peace of mind, knowing “my kids can grow up here calling this house a home for as long as we want.” Stability is a genuine benefit that a spreadsheet can’t price. As another commenter put it, “not everything needs to make money.”

Why do so many owners still say buying wins?

For many commenters, the strongest argument is that rent keeps climbing every year, while a mortgage payment stays steadier. One user described a mortgage as “locking in a fixed price for a long term rent.”

Statistics Canada shows that pressure is real. The rent component of the Consumer Price Index (CPI) rose 3.5% year over year in June 2026.

One homeowner in Saskatoon, Saskatchewan, shared their own numbers. They bought their home in 2019 for $350,000, when comparable four-bedroom rentals went for about $1,800. Those rents now average roughly $2,800, while their $1,800 mortgage payment hasn’t changed.

They also report $230,000 in equity and say the purchase passed the 5% test from day one: 5% of $350,000 works out to about $1,458 a month, which is less than the going rent.

The same owner admitted, however, that maintenance, taxes and insurance keep rising. When another user described property tax changes as small, a Calgary resident replied: “Cries in Calgary.”

They have a point. According to the City of Calgary, the owner of a typical single-family home assessed at $706,000 will pay $387 more in property tax in 2026. Most of that increase comes from the provincial portion of the bill, which funds education and rose 21% for that typical homeowner. Even so, the total bill of roughly $4,695 works out to about 0.66% of the home’s value, below the 1% Felix assumes in his rule. The lesson for owners is that property tax can rise quickly even where it starts out low.

Another commenter made the case for leverage. Put 15% down on a $1 million home, they argued, and 4% annual growth would lift its value to about $1.22 million in five years. The arithmetic checks out, but leverage cuts both ways: borrowed money can magnify losses just as fast if prices stall or fall. The example also doesn’t deduct five years of interest, closing costs or land transfer tax. Felix’s rule assumes long-run real estate returns closer to 3% a year.