Should I wait for rates to fall?

Waiting trades a known rate for an unknown price. Model both: a 1% lower rate on a 10% higher price is usually worse, not better.

What discount rate should I use?

Use what the money would otherwise earn safely. The 10-year Treasury yield is the common choice and is what this site defaults to.

Does a negative NPV mean I should not buy?

It means the purchase does not beat the financial alternative on those assumptions. Housing stability, control and school access are real and are not in the model.

Not financial advice. Mortgage FV Calculator is a software calculator, not a personal-finance product or advisory service. It computes standard financial functions and displays the results for your convenience. Nothing here constitutes, or is intended to constitute, financial, investment, tax, legal, mortgage, credit, or insurance advice. Always consult a qualified professional before making any financial decision.

Is buying worth it at a 7% mortgage rate? An NPV answer

By Knobugsoft Engineering · Knobugsoft LLC · Last reviewed August 14, 2026 · Methodology

"Is buying worth it at 7%?" is not a payment question. The payment tells you what you can cover; net present value tells you whether the purchase beats the same cash doing something else.

This scenario discounts every cash flow — payments out, rent avoided, equity built, sale proceeds net of selling costs — back to today at a 5% Treasury-based rate.

Assumptions used

Purchase price: $450,000
Down payment: $90,000 (20%)
Rate / term: 7.00% fixed, 30 years
Property tax: 1.1% of value per year
Insurance & maintenance: $1,900 + 1% of value per year
Comparable rent: $2,400 per month, rising 3%
Discount rate: 5% (Treasury-based)
Appreciation: 3.5% per year

Illustrative figures, rounded. Replace them with your own in the calculators linked below — results will differ.

The cash flows that actually matter

Principal and interest on $360,000 at 7% is roughly $2,395. Add about $413 of property tax, $158 of insurance and $375 of maintenance and the true carrying cost is close to $3,341 a month — against $2,400 of rent avoided.

That $941 monthly gap is the price of admission. NPV asks whether equity growth and the eventual sale repay it with enough left over to beat the discount rate.

• Out: payment, tax, insurance, maintenance, closing costs, selling costs
• In: rent avoided, principal repaid, appreciation on the whole asset
• Discounted at 5%, so later dollars count for less

Why the rate matters less than the hold

At 7%, the first years are almost pure interest — roughly 88% of the early payment. Nearly all of the return therefore comes from appreciation and from the rent you stop paying, both of which need time.

Closing costs of about 3% at purchase and 6% at sale mean a short hold is nearly always NPV-negative at 7%, no matter how good the house is. The break-even hold on these assumptions typically lands between five and eight years.

The appreciation the deal needs

Rather than guessing appreciation, invert the question: at what growth rate does NPV reach zero? That break-even appreciation rate is the honest bar the local market has to clear.

If the answer is above what the market has averaged over decades, the deal depends on an unusual outcome. If it is comfortably below, the purchase has margin for error.

What changes the answer

Refinancing later is real but uncertain — model it as an option, not a plan. A lower discount rate makes buying look better; using a Treasury yield keeps the comparison honest against a genuinely risk-free alternative.

Rent growth is the most underrated input. At 3% growth, the rent avoided in year ten is 34% higher than today's, and that stream is what carries the NPV over the line.

Key takeaways

• At 7%, the hold period decides the outcome far more than the rate itself.
• Transaction costs of roughly 9% round-trip make short holds NPV-negative in most markets.
• Solve for break-even appreciation instead of assuming a number.
• Rent growth, not house-price growth, is often what makes buying work.

Run it yourself

Each link opens the calculator pre-filled with this scenario's numbers.

Common questions

Should I wait for rates to fall?: Waiting trades a known rate for an unknown price. Model both: a 1% lower rate on a 10% higher price is usually worse, not better.
What discount rate should I use?: Use what the money would otherwise earn safely. The 10-year Treasury yield is the common choice and is what this site defaults to.
Does a negative NPV mean I should not buy?: It means the purchase does not beat the financial alternative on those assumptions. Housing stability, control and school access are real and are not in the model.

Other scenarios

Unfamiliar with a term used here? See the mortgage glossary.

About the author

Quantitative finance engineering team, Knobugsoft LLC

Knobugsoft LLC builds financial calculation software. The same amortisation, time-value-of-money and discounted cash-flow engine that powers these guides serves the site's public API and is covered by an automated regression test suite run on every release.

• Amortisation and escrow modelling (principal, interest, taxes, insurance, PMI, HOA)
• Time value of money: future value, present value, NPV and IRR
• Rent-versus-buy and refinance break-even analysis

Every formula used on this site is documented on the methodology page. Spotted something wrong? Tell us — corrections are published with the review date updated.