Lower Home Prices or Lower Mortgage Rates: Which Actually Saves You More?

When buying a home, one of the first questions people ask is, “What’s the mortgage rate?”

It’s understandable. Mortgage interest rates directly affect monthly payments and the total cost of financing a home.

But what if the property price matters even more?

Would you rather buy a home at a higher price with a lower mortgage rate, or at a lower price with a higher mortgage rate?

To answer that question, let’s compare two very different housing markets: 2022 versus 2026.

We’ll use condominium apartments in Scarborough, Toronto, as our example and compare minimum down payments, insured mortgage rates, monthly payments and what happens when the mortgage comes up for renewal.

1. How Much Have Home Prices Changed?

In March 2022, condo apartments in Scarborough sold for an average of approximately $665,495.

By September 2026, the average selling price was approximately $464,853.

That’s approximately $200,000 between the two periods.

These figures represent the average prices of condo apartments sold during each period, rather than the change in value of a particular condo.

But they provide an interesting comparison of how the cost of entering the housing market has changed.

2. The Minimum Down Payment: Then vs. Now

Let’s assume both buyers are purchasing an owner-occupied condo with the minimum down payment.

Under standard Canadian insured mortgage guidelines, the minimum down payment is generally 5% of the first $500,000 and 10% of the amount above $500,000.

Since both buyers are putting down less than 20%, mortgage default insurance is required.

We’ll include the insurance premium in the mortgage.

Ontario’s 8% sales tax on the mortgage insurance premium is payable upfront. Land transfer taxes, legal fees and other closing costs are separate.

3. But Mortgage Rates Were Lower in 2022

Mortgage rates were considerably lower in early 2022 than they are today.

For our illustration, we’ll use these two mortgage rates:

The 2022 rate is an illustrative historical assumption rather than a verified four-year lender quote. The 2026 rate is the five-year fixed rate used for this comparison, subject to lender eligibility and availability.

That’s a 1.30 percentage-point increase in the mortgage rate.

You might expect the buyer purchasing today to have a higher mortgage payment.

But look at the numbers.

4. Monthly Mortgage Payments: 2022 vs. 2026

That’s approximately:

• $7,236 less annually
• $21,708 less over three years
• $36,180 less over five years

These are payment comparisons at the initial rates, not guaranteed total savings or total interest-cost comparisons.

The 2026 buyer also needed approximately $18,300 less for the down payment.

Why such a significant difference?

Because they’re borrowing approximately $189,600 less.

5. What Happens to the 2022 Buyer After Four Years?

Now here’s something many homebuyers don’t think about when purchasing a home.

The mortgage rate you receive today is not necessarily the rate you’ll have forever.

When your mortgage term expires, you may need to renew at whatever rates are available at that time.

Let’s return to our 2022 buyer.

They purchased a Scarborough condo for $665,495 and started with a total insured mortgage of approximately $648,903.

Their original monthly payment was approximately $3,168 at 3.29%, amortized over 25 years.

Assume they made all their scheduled monthly payments over four years, without making additional lump-sum payments.

Here’s what their mortgage would look like.

After four years, the homeowner has paid over $152,000 in monthly mortgage payments.

Yet they still owe approximately $577,153.

That’s because part of each payment goes toward interest, particularly during the earlier years of a mortgage.

And now comes the important part.

Their original mortgage term has ended.

6. Renewing at Today’s 4.59% Five-Year Fixed Rate

Let’s assume this homeowner renews the remaining mortgage balance of $577,153 at 4.59%, keeping their remaining 21-year amortization.

The homeowner has less mortgage debt than when they started, but the higher interest rate means their required monthly payment increases.

For timing purposes, a four-year mortgage beginning in March 2022 would have matured in March 2026. Applying the October 2026 five-year fixed example rate is a hypothetical renewal comparison, not a historical quote for that March maturity date.

7. What If Someone Buys at Today’s Lower Price Instead?

Now let’s compare our homeowner who purchased in 2022 and is renewing against someone purchasing at the September 2026 average condo price.

Both are using a 4.59% five-year fixed mortgage rate.

But the payment isn’t even the most interesting part of this comparison.

Look at the mortgage balances.

The homeowner who purchased in 2022 still owes approximately $577,153 after making four years of mortgage payments.

The person purchasing today starts with a mortgage of approximately $459,275.

That’s a substantial difference.

The new buyer benefits from both a smaller mortgage and a lower required monthly payment.

It’s important to recognize that the new buyer also receives a fresh 25-year amortization, while the existing homeowner has only 21 years remaining. That difference contributes to the lower payment.

But even without looking at monthly payments, the new buyer’s starting mortgage debt is substantially smaller.

8. And What About Property Values?

The original purchase price affects more than your monthly mortgage payment.

It also affects your equity.

Imagine the homeowner who purchased for $665,495 in 2022 owned a condo that had declined in value to $464,853.

Here’s what their equity position would look like after four years.

This is a hypothetical example, not a valuation of a specific condo.

Not every Scarborough condo has declined by the same amount. Different properties sold during the two periods, and actual values depend on comparable sales, building conditions, size and location.

However, the example shows why the purchase price can influence your financial position long after you buy.

A homeowner with limited or negative equity may face challenges selling, refinancing or switching lenders.

They may still be able to renew with their existing lender, depending on their mortgage terms and circumstances.

9. What If Mortgage Rates Go Down Later?

One reason some buyers continue waiting is the possibility that mortgage interest rates could decline.

That’s understandable.

Lower rates can reduce mortgage payments or interest costs.

But here’s something to consider.

If you purchase at a lower price, you generally start with a smaller mortgage balance, assuming similar down payment structures.

Even if rates eventually decline, a buyer who purchased at a substantially higher price may still owe more.

For example, someone purchasing today at $464,853 starts with approximately $459,275 in insured mortgage debt using the minimum down payment.

Someone who purchased in 2022 at $665,495 started with approximately $648,903 in insured mortgage debt.

The difference is almost $190,000.

Future interest-rate changes won’t change those original borrowing amounts.

Of course, falling rates are not guaranteed, and breaking an existing fixed-rate mortgage early may involve significant penalties.

10. Does This Mean Buying Today Is Always Better?

Not necessarily.

Our example demonstrates that a lower purchase price can more than compensate for a higher mortgage rate.

But buyers still need to consider several important factors:

• Whether the property fits their financial situation and long-term plans.
• Whether they can comfortably afford the payments.
• Mortgage qualification requirements and the applicable stress test.
• Property taxes, maintenance fees and other ownership expenses.
• Closing costs and available savings.
• The possibility of future changes in interest rates and property values.

Buying a home should never be based solely on an expectation that rates will decrease or home prices will rise.

The goal is to make an informed decision based on the complete financial picture.

The Bottom Line: The Lowest Rate Doesn’t Always Mean the Lowest Cost

Our Scarborough condo example demonstrates how dramatically the numbers can change when purchase prices decline.

Compared with someone purchasing in March 2022, a buyer purchasing at the September 2026 average price could:

• Need approximately $18,307 less for the minimum down payment.
• Start with approximately $189,628 less mortgage debt.
• Have an initial monthly payment approximately $603 lower, even at a higher mortgage rate.
• Start with approximately $117,878 less mortgage debt than the 2022 homeowner has remaining after four years.
• Have a mortgage payment approximately $994 lower monthly than that homeowner renewing at the illustrative 4.59% rate.

These differences demonstrate why comparing mortgage rates alone doesn’t tell the full story.

When evaluating a home purchase, it’s worth considering not just the mortgage rate but also the total purchase price, down payment, amount borrowed and potential renewal costs.

Let’s Compare Your Own Numbers

Whether you’re buying your first home, planning your next move or approaching a mortgage renewal, understanding the numbers can help you make a more informed decision.

Instead of focusing on just the lowest interest rate, let’s compare the full mortgage cost, monthly payments and long-term implications.

Phone: 365-305-3789

Email: info@gianm.ca

Website: https://gianm.ca

Explore the Mortgage Calculators: https://gianm.ca/calculator

Sources and methodology

TRREB March 2022 Market Watch and September 2026 Scarborough condo apartment statistics; CMHC minimum down payment and mortgage insurance premium rules; illustrative mortgage calculations over the stated amortizations.