I did a bit of scribbling last night trying to put numbers to the two different scenarios. Again, the question is not really whether to go for this property. I already have it, the question is what to do with it. When it's time to leave, will be be better off (long game) keeping our current home as a rental or sell and move on.
I'd guess this won't happen for at least 5 years, maybe even 10 or more. I came to the conclusion last night that given our timeframe, there are simply too many unknowns: future interest rates, future salary, future value of this house and the next house, rise in rents, inflation. I can try to estimate each of these given historical trends, but in the end I just didn't have any confidence in my final numbers.
I think the best I can do is just sit tight until the time is closer and re-evaluate. The thing that is bugging me now is that I don't know how to invest in the meantime. If we keep this house as a rental, we need to be saving more for a future downpayment. That changes where I would put our savings. I could split the difference, and invest 50% as if we need it for a downpayment but I'm not sure that would putus in a good position for either choice when the time comes.
I did find it interesting how mortgages work differently in the US and in Can. Sounds like those of you in the US would avoid RE investment in Can like the plague. And yet many have been successful, even in expensive cities like Victoria.