When Is the Best Time to Borrow to Buy a Home?

Best Time to Borrow: Looking Beyond the Headline Mortgage Rate

Asking about the best time to borrow is really asking when it’s smarter to buy or rent your home, now or later. The key driver in that decision is the mortgage rate (taux du prêt), a central parameter in our buy or rent simulator.

In 2024, typical fixed mortgage rates in many eurozone markets are around 3.6% over 20 years for solid borrowers, after sitting near 1% in 2021. That shift completely changes the timing question and the buy or rent trade‑off.

Important: this article is general information, not personalized financial advice. Always base decisions on your own numbers. Simulate your situation on buy-or-rent.net before you decide.

1. How the loan rate shapes your monthly payment

The loan rate (taux_pret) is the price you pay for borrowed money. Even a 1‑point change (from 2.5% to 3.5%) significantly affects your monthly payment and the total interest cost.

1.1 Numeric example: €250,000 over 25 years

Compare the same purchase price with different rates:

• Loan amount: €250,000
• Term: 25 years (300 months)

Scenario A: 2% rate

• Monthly payment excluding insurance ≈ €1,060
• Total interest paid ≈ €67,900

Scenario B: 3.6% rate (current average)

• Monthly payment excluding insurance ≈ €1,270
• Total interest paid ≈ €131,000

Impact of moving from 2% to 3.6%:

• +€210 per month, or +€2,520 per year
• +€63,000 of interest over the life of the loan

For the same property, the timing of when you borrow can cost or save you tens of thousands of euros purely through the loan rate.

1.2 Don’t forget mortgage insurance

On top of the nominal loan rate, you pay borrower insurance, often 0.25–0.45% of the outstanding balance per year. On €250,000 at 0.35%:

• Annual insurance cost ≈ €875
• Over 20 years: ≈ €17,500 (before any indexation)

In our buy or rent simulator, the combination of taux_pret + insurance rate gives a realistic view of your total monthly cost.

2. Best time to borrow: compare against the cost of renting

The mortgage rate alone does not tell you the best time to borrow. You must compare it with the cost of renting and the potential return on your savings if you stay a tenant.

2.1 Example: rent at €1,100 or buy at 3.6%?

Assume:

• Current rent: €1,100 / month
• Annual rent increase (linked to IRL index): 2%
• Comparable purchase price: €250,000
• Loan rate: 3.6% over 25 years
• Loan payment (principal + interest), no insurance: ≈ €1,270

At first glance, renting looks cheaper (€1,100 vs €1,270). But you need to factor in:

• Rent revaluation: at 2% per year, your €1,100 rent becomes ≈ €1,635 after 20 years
• Fixed mortgage payment: with a fixed rate, your principal+interest payment is stable in nominal terms (insurance and charges may vary)

Over 10 years, the cumulative difference between rent and mortgage payments is not obvious by eye. This is exactly what a buy or rent simulator computes: the cash flows of each option year by year.

2.2 What if you invest the difference as a renter?

If you keep renting, you can invest your savings:

• For example in a global equity ETF with an expected investment rate of 4–6% per year over the long run
• Or in savings accounts / bonds paying 2–3% per year

Let’s say your all‑in ownership cost would be €1,400/month (mortgage + insurance + averaged property tax), and your rent is €1,100:

• Difference: €300/month
• Invested at 4% per year for 15 years ≈ €74,000 after compounding (order of magnitude)

The “best time to borrow” therefore also depends on the return on your investments compared with your effective loan rate.

3. Loan rate vs inflation: borrow sooner or later?

The broader inflation environment changes the buy or rent decision and the timing of your mortgage.

3.1 When inflation is higher than your loan rate

Imagine:

• Loan rate: 3.6%
• Average inflation: 4%

In this situation, the money you repay in 15–20 years is worth less in real terms. You are effectively repaying your debt with “cheaper” euros. Your real interest rate (loan rate minus inflation) is close to 0% or even negative.

In that environment, borrowing sooner can make sense if:

• Your income at least partially tracks inflation
• The monthly payment remains affordable
• You hold the property long enough to amortize transaction costs (notary, agency, renovation)

3.2 When inflation falls but rates stay high

Reverse scenario:

• Loan rate: 3.8–4%
• Inflation: 1.5%

Your real rate is now higher (~2.3%). The real cost of borrowing increases, while your wages grow more slowly. In this case, the best time to borrow might be to:

• Wait for a potential rate drop
• Extend the term to lower monthly payments (but total interest goes up)
• Or stay a renter and invest the difference if investment returns are attractive

Once again, the buy or rent answer is never universal: it depends on your numbers and your holding period.

4. Scenario: buy now at 3.6% or wait for 2.8%?

Many households wonder: should I take a mortgage now at 3.6%, or wait 2–3 years hoping for 2.8%?

4.1 Starting assumptions

• Property price today: €280,000
• Down payment: €30,000
• Loan amount: €250,000
• Term: 25 years

Scenario 1: borrow now at 3.6%

• Monthly payment (no insurance) ≈ €1,270
• Total interest ≈ €131,000

Scenario 2: wait 3 years, then borrow at 2.8%

Several things happen during the 3‑year wait:

• You keep paying rent
• Property prices may rise, fall or stay flat
• Your savings and down payment may grow

4.2 The cost of rent while you wait

Assume:

• Current rent: €1,000/month
• Annual rent increase: 2%

Over 3 years, you pay roughly:

• Year 1: €12,000
• Year 2: €12,240
• Year 3: €12,485
• Total ≈ €36,700 in rent

If the property price stays at €280,000 and you secure 2.8% for 25 years, you save interest compared with 3.6%, but you have paid more than €36k in rent while waiting. A buy or rent simulator like buy-or-rent.net lets you compare these cash flows year by year to see when ownership overtakes renting.

4.3 What if property prices move?

• If prices drop 10%: the property falls to €252,000; you borrow less, which may offset rent paid while waiting
• If prices rise 10%: the property climbs to €308,000; the benefit of a lower rate can be wiped out by the higher purchase price

The best time to borrow therefore also depends on your (cautious) expectations for your local market and your ability to handle a higher payment today.

5. Loan rate and term: shorter vs longer mortgage

Timing isn’t only about “this year vs next year”. It also includes your loan term.

5.1 20 years vs 25 years at 3.6%

On a €250,000 loan at 3.6%:

• 20‑year term: monthly ≈ €1,460; total interest ≈ €100,000
• 25‑year term: monthly ≈ €1,270; total interest ≈ €131,000

Extending the term:

• Makes the loan easier to qualify for (lower monthly payment)
• But increases total interest (about +€31,000 in this example)

For some households, the “best time to borrow” is actually the point when their income allows them to shorten the term while staying comfortable.

5.2 Early repayments as a timing tool

You can:

• Take a 25‑year mortgage for safety (lower monthly payment)
• Then make early repayments if your income rises

Prepayment penalties are typically capped at 3% of the amount repaid early or six months of interest (whichever is lower). This gives you a way to hedge timing risk: you borrow when you need a home, then accelerate repayment later instead of waiting indefinitely for the “perfect” rate.

6. Other factors that interact with the loan rate

The mortgage rate never acts in isolation. Several other parameters in our buy or rent simulator influence the best time to borrow:

• Notary fees: roughly 7–8% for existing homes, 2–3% for new builds
• Agency fees: often 3–5% of the purchase price
• Renovation cost: energy upgrades, compliance, impact of energy performance ratings
• Property tax: from €450 to over €5,000 per year depending on city and size
• Property tax revaluation: annual increases decided by local authorities

Quick example: an older flat at €250,000 plus €20,000 renovation and 8% notary fees actually costs:

• Net price: €250,000
• Notary fees (8%): €20,000
• Renovation: €20,000
• Total acquisition cost: €290,000

If you finance part of these costs with your mortgage, the loan rate applies to a higher base. This is why the best time to borrow also depends on:

• Your ability to pay some costs in cash
• Your holding period (the longer you keep the home, the more these upfront costs are spread out)

7. Using a buy or rent simulator to pick your timing

To move from gut feeling to data‑driven decision, the most effective tool is a detailed buy or rent simulator like the one on buy-or-rent.net.

7.1 Key inputs to test

• Loan rate (taux_pret): try 3.6%, then 3.0% and 4.0% to see sensitivity
• Loan term: 20, 22, 25 years
• Investment rate: 2%, 4%, 6% for the rent + invest strategy
• Annual rent increase: 1%, 2%, 3%
• Inflation: low (1.5%), medium (3%), high (4.5%) scenarios

In a few minutes, you can see for each scenario after 10, 15 or 20 years:

• Your net wealth if you bought (property value minus remaining mortgage)
• Your net wealth if you rented (financial assets accumulated)

7.2 Interpreting the results

If, for example, at a 3.6% loan rate the “buy” scenario yields higher net wealth than the “rent + invest” scenario after 12 years, that means:

• The break‑even point is around 12 years of ownership
• If you expect to move again after 6 years, renting might be more rational

The best time to borrow therefore also depends on your life horizon: job mobility, family plans, and how long you realistically plan to stay in the property.

Conclusion: the best time to borrow depends on your numbers

There is no universal answer to the timing question or to the buy or rent dilemma. A 3.6% mortgage rate can be acceptable, even attractive, if:

• You plan to stay long term (10–15 years or more)
• Your current rent is high and rising regularly
• Your alternative investments do not clearly beat the real cost of the loan

Conversely, borrowing may be less compelling if:

• You expect to move again soon
• You have access to strong investment opportunities
• Your local housing market looks overvalued or very uncertain

The right question is not just “When is the best time to borrow?”, but “Given today’s mortgage rate, my rent, my investment options and my time horizon, is it better to buy or rent?”

This article is not personalized financial advice. For an informed decision, work with your own data and, if needed, consult a qualified adviser.

Simulate your situation on buy-or-rent.net to test different loan rates, terms and market scenarios, and see when buying potentially becomes more attractive than renting.