Leverage effect — buying with a loan vs investing in the market
A fixed-rate loan stacks two distinct advantages. Leverage: with a small down payment you control
a much larger asset — no margin calls, rate locked for 25 years. Debt erosion: you repay in devalued euros
a price fixed today, your frozen payment melting away with inflation. But the leverage fades as the loan
amortizes — this simulator finds the exact date when selling and moving your equity to the market becomes
the better play.
Annual return on the money locked in the property, relative to what a sale today would free up: huge
at first because the bank finances almost everything, it melts as your own share grows.
4 · Inflation pays your loan back for you
Market return break-even
All else equal, sweep the annual market return. Final wealth at the horizon (today's euros) for the
best property strategy — buy, then sell at whatever date is optimal for that return — vs the
all-market alternative.
Loan interest rate break-even
All else equal, sweep the fixed loan rate. Cheap money is the whole point of the leverage — this shows
exactly how expensive the bank's money can get before the loan eats the leverage.
Property inflation break-even
All else equal, sweep the property market's annual appreciation. Below the crossing point, the
property doesn't appreciate enough for buying to beat the market.
Equivalent rent break-even
Buy to live · buy-to-let · rent & invest
Same person, same property purchase, same money — three ways to house yourself and invest the rest,
at equal monthly spending. Net wealth if you liquidate everything at that date, in today's euros.
Here your own rent matters: only “buy to live” avoids it, and only the primary residence
is exempt from capital-gains tax on sale.