Rent or Buy a Home
Whether to rent or buy a home is not settled by comparing rent against a monthly mortgage payment — that comparison is almost always misleading. The calculator sets two complete financial trajectories against each other over the same period: buying with a mortgage versus renting and investing the difference. The scenario with the higher net position at the end of the horizon wins, and the year-by-year table shows exactly which year buying overtakes renting.
Formula and explanation
NWпокупка = VT·(1 − разходи по продажба) − BT | NWнаем = WT
Buying scenario: you pay a down payment, mortgage payments and ownership costs, but accumulate equity in an appreciating property. The buyer's net position is the property value minus what is still owed to the bank.
Renting scenario: an honest comparison requires the renter to invest everything they do not pay as an owner — the down payment and the one-off purchase costs at the start, plus the monthly difference between the owner's full costs and the rent. If that difference is negative, it is deducted from the portfolio.
Buying is financially better for horizons where the difference is positive. The break-even point is the first year in which it becomes positive — if your planned stay is shorter, renting usually wins because of the one-off purchase costs.
Tax treatment also affects the result — in Bulgaria the income from selling one home owned for more than 3 years is tax-free for individuals. All percentages are assumptions you can and should adjust.
Methodology
What the calculator compares
The most common mistake in this decision is comparing "rent of 800 € against a payment of 775 €" and concluding that buying is obviously better. That comparison misses two things: the owner also pays one-off acquisition costs, local tax, maintenance and insurance, while the renter holds free capital that can be invested.
So the calculator does not compare monthly payments; it compares net position — how much money you actually hold at the end of the period under each scenario. Use it when considering a first home, a move to another city, or when weighing whether to keep renting and invest the capital you have.
The two trajectories
NW(buy) = V(T) · (1 − selling costs) − B(T)
The buyer puts down a deposit and one-off costs, pays a mortgage instalment and annual ownership costs, but accumulates equity in an appreciating property. At the end of the horizon their net position is the market value V(T), less selling costs, minus the outstanding loan balance B(T). The calculation assumes a notional sale at the end of the period — not because you must sell, but because it is the only way to state both scenarios in the same money.
NW(rent) = W(T)
The renter starts with a portfolio equal to the deposit plus the one-off purchase costs — the money not sunk into property. Each month, the difference between the owner full costs (instalment plus ownership costs) and the rent is added to the portfolio. If that difference turns negative, it is withdrawn from the portfolio instead. The portfolio grows at the chosen investment return. This is the fair comparison: the renter invests, with discipline, everything they do not pay as an owner.
Rent grows at the chosen annual rate, the property value at its own, and ownership costs are computed as a percentage of the current value, so they grow as well.
Worked example: a 200,000 € flat in Sofia
Price 200,000 €, deposit 20% (40,000 €), a loan of 160,000 € at 3.2% over 25 years, one-off acquisition costs of 5% (10,000 €), annual ownership costs of 1.2% of value, rent of 800 € a month, rent growth 3%, price growth 3%, investment return 5%, a 15-year horizon and selling costs of 3%.
The monthly mortgage payment is 775.49 €. The renter portfolio starts at 40,000 + 10,000 = 50,000 €.
In the first year the owner pays 775.49 € of instalment plus 200 € of monthly ownership costs, 975.49 € in total, against rent of 800 €. The renter invests the 175.49 € difference each month. By the fifteenth year, however, rent has reached 1,210.07 € while the owner costs are 775.49 + 302.52 = 1,078.01 € — the flow reverses and the renter begins drawing on the portfolio.
| Year | Position if buying | Position if renting | Difference |
|---|---|---|---|
| 1 | 44,068 € | 54,713 € | −10,645 € |
| 2 | 54,448 € | 59,446 € | −4,998 € |
| 3 | 65,151 € | 64,193 € | +957 € |
| 5 | 87,563 € | 73,707 € | +13,856 € |
| 10 | 149,974 € | 97,251 € | +52,723 € |
| 15 | 222,698 € | 119,490 € | +103,208 € |
The year-15 buying position is built up as follows: property value 200,000 × 1.03^15 = 311,593 €, less 3% selling costs = 302,246 €, less the outstanding loan balance of 79,548 € = 222,698 €.
The break-even point is year 3. Renting leads for the first two years because the 10,000 € of one-off acquisition costs are sunk and must be earned back through appreciation. If you plan to live in the home for under three years, then on these assumptions renting is the better position.
What moves the break-even point
Two assumptions drive the result more than all the others. The first is property price growth, because it applies to the whole 200,000 € of value rather than only the 50,000 € you put in — the leverage effect. The second is the renter investment return.
| Price growth | Break-even | Difference at year 15 |
|---|---|---|
| 0% | year 14 | +5,996 € |
| 1% | year 8 | +33,840 € |
| 3% | year 3 | +103,208 € |
| 5% | year 2 | +195,264 € |
| Investment return | Break-even | Difference at year 15 |
|---|---|---|
| 3% | year 3 | +134,406 € |
| 5% | year 3 | +103,208 € |
| 7% | year 4 | +61,434 € |
| 8% | year 5 | +35,508 € |
The lesson is not which scenario wins, but how heavily the answer depends on two numbers nobody knows in advance. So run the calculator at least three times — a conservative, a base and an optimistic scenario — and see whether the decision changes.
Tax and practical context
Income from the sale of one residential property is exempt from tax for individuals if more than three years have passed between acquisition and sale. That makes a horizon beyond three years favourable in tax terms as well as financial ones. On a shorter holding, or on a second property, the gain is taxed at 10%.
The 5% of one-off costs covers the local acquisition tax, which varies by municipality, notary fees, registration, bank charges on the loan and agency commission. The annual 1.2% covers local property tax, the waste collection fee, insurance, building association charges and a repair reserve — the last of these being the most frequently underestimated.
If the property is bought with the intention of letting it, consider a third scenario as well: rental income of an individual is taxed at 10% after deducting 10% of statutory recognised expenses.
Limitations
The output is only as good as the assumptions. The most sensitive of them is the investment return — it applies to capital that compounds over the whole horizon, so a small change is multiplied many times over. The figure you enter should be realistic after taxes and fees, and should match a portfolio you would genuinely hold with discipline for the entire period.
The model assumes a fixed mortgage rate, constant annual growth rates with no downturns, no periods without a tenant or without work, and complete investing discipline — in practice the assumption broken most often. It excludes taxes on investment returns, moving costs, repairs beyond the annual percentage, and the non-financial factors: security of tenure, freedom to move, and the constraints of qualifying for a loan. The calculator gives the financial frame of the decision, not the whole decision.
Frequently asked questions
How many years of residence make buying worthwhile?
In the base scenario — a 200,000 € flat in Sofia with 3% annual price growth and a 5% investment return — the break-even point falls around year three. With zero price growth it shifts out to year fourteen. The practical rule is that under three years renting almost always wins, because of the one-off acquisition costs.
Why is comparing rent against the monthly payment not enough?
Because the instalment is not the owner full cost. Local property tax, the waste fee, insurance, maintenance and building charges sit on top of it, and at the outset so do one-off costs of around 5% of the price. On the other side, the renter holds the deposit and those costs as free capital that earns a return. Both sides of the comparison get missed.
What investment return should I assume?
This is the most sensitive parameter in the calculator and it deserves conservatism. Assume a return you would realistically achieve after fees and taxes, with a portfolio you would hold for the whole horizon without liquidating it in a downturn. Also run a scenario 2 percentage points lower — if the decision flips, it is not robust enough.
Do I owe tax when I sell my home?
Income from the sale of one residential property is not taxed for individuals if more than three years have passed between acquisition and sale. On a shorter holding, or on the sale of a second property, the gain is taxed at 10%. Tax treatment carries its own rules and exceptions, so for a more complex case check your specific situation with a specialist.
What does the calculator not account for?
It does not capture the non-financial factors that often weigh more than the numbers: the security of owning your home, the freedom to move quickly, the constraints of qualifying for a loan, the risk of losing income. Nor does it allow for void periods without a tenant, extraordinary repairs, taxes on investment returns, or real-world discipline in investing the difference.
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The calculators are for guidance only and do not constitute financial, tax or legal advice. Parameters reflect 2026 legislation and should be verified annually. For a specific case, book a consultation with our specialists.