Methodology
How the calculator works, what formulas it uses, and what assumptions are built in.
Disclaimer: This calculator provides illustrative estimates only and does not constitute financial, tax, or investment advice. Results are hypothetical projections based on your inputs and assumed rates. Actual returns, costs, inflation, and housing prices will differ. Consult a licensed financial adviser before making major financial decisions.
Mortgage calculation
Monthly mortgage payments are calculated using the standard amortizing loan formula:
Where:
P = loan principal (€315 000)
r = monthly interest rate (annual rate ÷ 12)
n = total number of payments (years × 12)
Example: €315,000 at 3% for 30 years → monthly payment = €1328.05
Each month, the payment is split: interest = balance × r,
then principal = PMT − interest. The loan balance decreases
by the principal portion.
Home equity & value
Home value grows at the assumed annual appreciation rate, compounded monthly:
Home equity is simply:
The buyer's net worth equals their home equity. No adjustment is made for transaction costs on a hypothetical sale (real estate agent fees, taxes), so actual realisable equity would be somewhat lower.
Rent + invest scenario
For the comparison to be fair, the renter is assumed to invest money they don't spend on buying:
- Initial investment: the down payment plus one-time purchase costs. These are amounts the buyer spends upfront that the renter retains.
- Monthly investment (auto mode):
max(0, buy_monthly_cost − current_rent). When buying is cheaper than renting in a given month, no extra investing is assumed. - Monthly investment (custom mode): a fixed amount you specify.
The portfolio compounds monthly:
The renter's net worth equals the portfolio value.
Inflation adjustment
Nominal values are converted to real (today's purchasing power) values by dividing by the cumulative inflation factor:
For example, €500,000 in 30 years at 2% inflation is worth about €277,000 in today's money.
Rent increases are also modeled: rent(m) = initial_rent × (1 + annual_increase/12)^(m−1)
Assumptions & limitations
- Fixed interest rate: the model assumes a constant rate throughout. Variable (Euribor-linked) rates will fluctuate in reality.
- Constant investment return: returns are assumed steady. In reality, markets are volatile — sequence-of-returns risk matters significantly.
- No taxes: capital gains tax, rental income tax, or tax deductions (e.g. mortgage interest deductions) are not modeled. Finnish capital gains tax is currently 30–34%.
- No sale costs: the buyer's final equity does not deduct real estate agent fees (~3–4%) or transfer tax (~2%) payable on a future sale.
- Housing company debt: capital fees (rahoitusvastike) for housing company loans are not separately modeled. Include them in the maintenance fee if relevant.
- No currency risk, no leverage on investments: investments are assumed to be in a diversified portfolio with no leverage.
- Steady rent increases: modeled as a smooth annual rate. In reality, rents can jump or be frozen depending on the rental market.
Default assumptions
| Parameter | Default | Rationale |
|---|---|---|
| Apartment price | €350,000 | Mid-market Helsinki 2-room flat |
| Down payment | €35,000 (10%) | Standard bank minimum in Finland |
| Interest rate | 3.0% | Approximate 2024–25 Finnish variable rate |
| Mortgage term | 30 years | Common maximum in Finland |
| Maintenance fee | €450/mo | Typical for a 70m² Helsinki condo |
| Home appreciation | 2.0%/yr | Long-term Helsinki average |
| Monthly rent | €1,400/mo | Market rent for comparable flat |
| Rent increase | 2.0%/yr | Roughly in line with long-run inflation |
| Investment return | 6.0%/yr | Diversified global index fund, nominal |
| Inflation | 2.0%/yr | ECB target rate |
| One-time costs | €3,500 | ~1% — transfer tax + arrangement fee |
| Annual repairs | €1,500 | ~0.4% of apartment value |
Try the calculator
All formulas above are implemented in real time as you adjust inputs.
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