EN - Thinking About Money

Mortgage Or Rent – Calculations

In a previous post I described, under which conditions I would go for a mortgage.

Assumption for a mortgage is a cash saved, that is something I do not care about when renting.

So-called LTV ( Loan-To-Value), which means portion of debt on asset price, I assume to be 90%. That is 10% of a property price I need to have in cash.

Let’s count a bit in more detail:

  • Rent: 2 000 Eur a month. 30 years mean 720 000 Eur thrown to trash.
  • Mortgage: Flat for 520 000 Eur.
  • I need 10%, 52 000 Eur. So I am borrowing 470 000 Eur from the bank.
  • Mortgage for 30 years, 470 000 Eur, interest rate 3% p.a.
  • Monthly payment is : 1 981 Eur.

In total, in 30 years I pay 713 300 Eur. 243 300 Eur is paid in interest.

In the Czech Republic, I can deduct 15% of paid interest from taxes. So I can count 85% from 243 300 Eur which means 206 000 Eur. Such rule can vary per country you live in.

Result? After 30 years renting I gave to someone else 720 000 Eur. And I still need to pay.

In 30 years of mortgage, I gave to someone else 206 000 Eur and as a bonus I own a flat.

Of course I assume a stability of interest rate and no change in rent. In reality I need to assume a growth of rent price and also salary. Payment of 2 000 Eur is different if my income is 3 000 Eur or 6 000 Eur.

PS If you are interested where I invest, you can check the overview HERE.