As a young-ish professional, I’ve been wondering whether I should buy my primary residence or keep renting. With this thought, I’ve been driven to answer this question in a rational manner.
You can see the results of this investigation on this website: linemo.
Loan interest rates
It all started when I wanted to know how much I would pay in interest for a loan. Because let’s face it, the interest rate is super opaque about how much interest I would pay over the life of the loan. One might, naively, think that a 4% interest rate means that I would pay 4% of the principal in interest over the life of the loan (In a loan, the principal is the original amount of money you borrow, not including any interest or fees).
However, this is not the case. The interest rate is applied to the remaining balance of the loan, every month. This means that the interest you pay decreases over time ; but the amount of interest you pay over the life of the loan is way higher than 4% of the principal.
So I’ve built a simple loan simulator to answer this question.
Case study : contracting a loan
Let’s assume that I pay every month 1,500€ over 20 years. The amount of the loan is 266,000€.
According to the current interest rates around 3.2%, I would pay 94 000€ in interest over the life of the loan ; or around 35% of the principal. Note that this is way more than the 4% of the principal that one may naively think.
Now that we understand how a loan works, let’s move on to the next question: should I buy a home, to live in, or rent it ?
Buy or rent?
You generally have 2 options:
- Buy a home (to live in)
- Rent a home
The question is: which option is better for you in the short, medium, and long run ?
Surprisingly, the answer is not obvious. At a first glance, it seems that buying a home is always better: instead of throwing money away by renting, you are investing in your own home. However, this is not always the case, mostly because of the costs associated with buying a home: agency fees and closing costs.
Agency fees are typically “paid by the seller” to the agency that helps them sell their home. Closing costs are the costs associated with the purchase of a home, such as notary fees, registration fees, etc. When summing up both costs, it is possible that the total cost of buying a home is higher than the total cost of renting a home. This means that for every transaction, you are losing money by buying a home. Now, it could be worth it if you stay long enough. How long ? This is the question that the buy or rent calculator answers.
Case study : renting or buying an apartment in France - fall 2025
As you can see, the conclusion is: Wait 15.2 years for buying to overtake renting. So in this scenario, buying is better than renting ONLY if you stay in the apartment for more than 15.2 years.
Of course, there are many assumptions here that may not be true, especially since they are based on future values. For instance: the rent increase, the evolution of real estate prices, the Return on investment (ROI) of the savings, the tax rate, etc.
However, this calculator let’s you play with the assumptions to see how the result changes.
The math
Here is the math behind the calculator. In a nutshell, thanks to arithmetico-geometric series, we can compute all the interest payments, and the total amount of interest paid over the life of the loan.
Conclusion
All in all, this calculator is a tool to help you make decisions. It is not perfect, but it can be a useful tool to help:
- Understand how a loan works, and how many interest you will pay
- Understand the costs associated with buying / renting a home
- Understand the impact of the assumptions on the result
- Make a decision based on the results
Reuse
Citation
@online{guy2025,
author = {Guy, Horace},
title = {A Real Estate Investment Calculator},
date = {2025-11-21},
url = {https://blog.horaceg.xyz/posts/housing/},
langid = {en}
}