Deciding whether to rent or buy a property is one of the most important financial decisions you can make. In Poland, with rising property prices and fluctuating mortgage rates, this decision becomes even more complex. To better understand when it’s more advantageous to rent or buy, let’s consider a specific example.
Imagine you’re looking at an apartment in a block of flats priced at 600,000 PLN. The average annual increase in property value is 6%, while the monthly rent for a similar apartment is 2,500 PLN. In this scenario, you’re considering taking out a mortgage with an 8% annual interest rate, and you have a 10% down payment. Let’s explore three different mortgage terms—10, 20, and 30 years—and compare the costs.
Scenario 1: 10-Year Mortgage (Monthly Payment: 6,100 PLN)
If you choose a 10-year mortgage, your monthly payment will be 6,100 PLN, which is considerably higher than the 2,500 PLN monthly rent. Over 10 years, you’ll end up paying 732,000 PLN in mortgage payments, excluding your 10% down payment (60,000 PLN). The total paid will be 792,000 PLN.
At the same time, considering the average annual property value increase of 6%, your apartment’s value would rise significantly over this decade. After 10 years, the 600,000 PLN apartment could be worth approximately 1,073,000 PLN.
In this scenario, buying the apartment results in significant equity and value appreciation, making it a good long-term investment, despite higher monthly payments compared to renting.
Scenario 2: 20-Year Mortgage (Monthly Payment: 4,100 PLN)
For a 20-year mortgage, your monthly payment is lower, at 4,100 PLN, which is closer to the rent price. Over 20 years, you’ll pay 984,000 PLN in mortgage payments, excluding the 60,000 PLN down payment, for a total of 1,044,000 PLN.
After 20 years, the value of the apartment, assuming the same 6% growth rate, could rise to approximately 1,918,000 PLN. Here, while the total cost of buying is higher than in the 10-year scenario, the value of the property appreciates significantly, making buying a much more profitable option than renting in the long term.
Scenario 3: 30-Year Mortgage (Monthly Payment: 3,500 PLN)
The lowest monthly payment option is the 30-year mortgage, with a payment of 3,500 PLN per month. Over 30 years, you’ll pay 1,260,000 PLN in mortgage payments, and with the down payment, your total cost would be 1,320,000 PLN.
After 30 years, the property’s value could grow to approximately 3,431,000 PLN. While the total payments over time are much higher compared to shorter mortgage terms, the property’s significant appreciation makes it a worthwhile investment.
Rent vs. Buy Comparison
Now let’s consider the rent option. At 2,500 PLN per month, over 10 years, you would pay 300,000 PLN in rent. Over 20 years, you would pay 600,000 PLN, and over 30 years, 900,000 PLN. While these figures are much lower than the total cost of purchasing a home, renting provides no equity or long-term financial return. Over time, the opportunity cost of not owning a property becomes substantial.
When Does It Make Sense to Rent?
Renting may make more sense if:
- You don’t have the financial resources for a 10% down payment.
- You plan to stay in the property for a short period (less than 5-7 years).
- You want to avoid the risks of rising interest rates or property maintenance costs.
When Does It Make Sense to Buy?
Buying makes more sense if:
- You can afford the down payment and mortgage payments comfortably.
- You plan to stay in the property for the long term (10+ years).
- You want to benefit from property value appreciation and build equity over time.
Conclusion
In this scenario, while renting may seem like the cheaper option in the short term, buying a property in Poland offers significant long-term financial benefits. Property values increase steadily over time, and the equity you build by owning outweighs the cost of renting. Whether you choose a 10, 20, or 30-year mortgage, buying allows you to secure a valuable asset, which can ultimately appreciate in value far beyond what you would pay in rent.
