Is it better to buy a $600,000 house or a $700,000 house?

It depends on the lifestyle value of the larger home and what you do with the savings. A $700,000 house may appreciate more in dollar terms, but a $600,000 house can leave more room to invest, reduce stress, and improve financial flexibility.

How much lower is the mortgage payment on a $600,000 house compared to a $700,000 house?

Using a 20% down payment, 25-year amortization, and 5% mortgage rate, the $600,000 house has a mortgage payment roughly $465 per month lower than the $700,000 house.

What happens if you invest the mortgage savings instead?

In the example, investing the $20,000 down payment difference plus the $465 monthly mortgage savings at a 7% annual return grows to roughly $119,000 after 10 years.

Does the more expensive house build more wealth?

The more expensive house may build more home equity if both homes appreciate at the same rate. However, the smaller house plus consistent investing can produce a similar or better overall result, especially once maintenance, taxes, insurance, and flexibility are considered.

Why use 4.5% annual home appreciation?

The post uses 4.5% as a reasonable long-term Canadian housing appreciation assumption based on the author’s previous housing return estimate. Actual results vary by city, time period, and market conditions.

Is buying less house always the better choice?

No. A larger or more expensive home may improve quality of life through more space, a better location, or a shorter commute. The point is to understand the opportunity cost before committing to the larger mortgage.

Why does buying less house improve financial flexibility?

A smaller mortgage can leave more room in the monthly budget for investing, emergencies, career changes, travel, hobbies, or earlier retirement. That flexibility can be just as valuable as the investment returns.

04 Jun 2026 6 min read Advice

The $600k House VS the $700k House. A 10-Year Comparison

There's no shortage of content debating whether to rent or buy. Almost nobody asks the follow-up question: if you're buying, how much house are you actually buying?

That decision, not rent vs. own, but how much home to take on, might be the most consequential financial choice most Canadian families make. And most people make it based on what the bank will approve, not what the numbers actually say.

Let's look at the numbers together.

Where This Idea Started

When we bought our current house, I remember browsing properties that were just a little bit nicer - a slightly better neighbourhood, an extra bedroom, a larger garage, more privacy. The price difference wasn't dramatic. At the time, the gap was in the $50,000 to $100,000 range.

We had just sold our Toronto condo for $700K and were looking in that range after moving back to the city we grew up in. The average house in the area was around $550K, so $700K gave us solid options. We stuck to our budget despite the temptation to upgrade. That part we got right.

What we never considered was the opposite. What if we'd spent less? What if we'd bought a $650K house? A $600K house? Would $550K have actually given us a worse quality of life? I mean, that was the average in the area, right?

Most personal finance articles compare renting versus buying. That's useful, but it sidesteps a decision millions of Canadians actually face - how much house should you buy?

Meet Family A and Family B

Family A buys a $700,000 home. Family B buys a $600,000 home.

Assumptions:

20% down payment
25-year amortization
5% mortgage rate
10-year ownership period
4.5% annual home appreciation (Canadian long-term average per CREA)
7% annual return investing in XGRO

Family A puts down $140,000 and carries a $560,000 mortgage. Family B puts down $120,000 and carries a $480,000 mortgage. Family B immediately invests the $20,000 down payment difference into XGRO inside their TFSA - on closing day, before the ink is dry. They also invest the $465 monthly mortgage payment difference every single month.

What Happens After 10 Years?

Starting with the homes. At 4.5% annual appreciation:

Family A's $700K home grows to approximately $1,087,000
Family B's $600K home grows to approximately $932,000

The more expensive home appreciated roughly $155,000 more. At first glance, it looks like the larger home wins. It doesn't.

Family B's $20,000 lump sum grows to roughly $39,000 at 7%. Their $465/month contributions grow to approximately $80,000. Combined - roughly $119,000 sitting in a TFSA, tax-free, fully liquid, accessible in two business days.

To capture $155,000 in extra home appreciation, Family A gave up $119,000 in portfolio wealth. That's a much tighter trade-off than most people expect. And it gets worse when you remember what home equity actually is - illiquid, inaccessible without selling or borrowing, and concentrated entirely in a single asset in a single city. And if you have to sell, chances are you will pay a realtor 4-5% of the sale price. On a $700k home, that can be up to $35k, which right away eliminates the gap.

Family B's $119,000 can respond to a job loss, a mat leave, or a market dip worth buying into. The extra equity locked in Family A's walls cannot.

Not All Markets Are Equal

The 4.5% national average hides a wide range of outcomes. Toronto and Vancouver have had windows of 8-10% annual appreciation. If you bought in those markets at the right time, the case for the larger home is stronger.

But many Canadian markets spent years essentially flat before recent run-ups. If you stretched into a $700K home in one of those markets, the appreciation thesis didn't hold. And you sacrificed the portfolio growth to find out.

Nobody knows in advance which type of market they're in. The 4.5% average is a reasonable planning assumption. Betting on a Toronto-tier appreciation run is not.

The Costs That Keep Coming

The larger home doesn't just cost more once. It costs more every year.

A common rule of thumb is 1% of home value annually for maintenance. Over 10 years that's $70,000 for the $700K home versus $60,000 for the $600K home. Add higher property taxes, insurance, and utilities, and the gap between the two strategies widens further.

And I'll add something the spreadsheet doesn't capture - a larger home takes more of your time. I'm getting tired of cleaning, cutting grass, and shovelling snow. That's a cost too.

The Part Nobody Talks About

The real benefit of the smaller mortgage isn't the investment account. It is flexibility.

Less financial stress. More room in the budget. A larger emergency fund. Easier career changes. Greater ability to survive a layoff. More money available for travel and hobbies. The possibility of retiring earlier. These don't show up neatly in a spreadsheet, but they're the whole point.

Many Canadians spend decades optimizing for a larger house while accidentally reducing their freedom. This is why so many feel squeezed during periods of high inflation or economic uncertainty - there is simply no buffer.

My Take

The purpose of this post isn't to convince anyone to buy the cheapest house possible. A larger, or more expensive, home may genuinely improve your quality of life - more space for your kids, a shorter commute, a home you'll happily live in for thirty years. Those things have real value.

The point is simply to recognize the opportunity cost. Many people spend months debating whether to invest in XGRO, REITs, or dividend stocks. Then they casually add $100,000 to their home purchase without running a single calculation. That's backwards.

If I had to choose between a $700,000 house with no investing, or a $600,000 house with consistent investing, I'd choose the second every time. Not because housing is a bad investment. But because diversification creates options.

Owning both is better than stretching yourself to maximize only one. Having done the math now, I feel some regret not having looked at cheaper options when we bought our current home. Our house didn't stop us from continuing to invest, but a slightly smaller mortgage would have gotten us to retirement a little sooner.

Buy the house that leaves room for both. And be tempted to not spend the difference. Invest it!