How it is calculated
- Loan = price × (1 − down payment %)
- Monthly instalment = the reducing-balance instalment for that loan
- Loan balance after k months (k = 12 × comparison period) = loan × (1 + r)^k − instalment × ((1 + r)^k − 1) ÷ r, where r is the annual rate ÷ 12
- Total paid = down payment + instalment × k + price × maintenance % × years
- Home value = price × (1 + growth %)^years
- Net cost of buying = total paid − (home value − loan balance)
- Total rent = each year’s rent (12 months), with rent raised by the yearly increase
If the comparison period is longer than the loan tenure, instalments stop when the loan ends.
Whichever has the lower net cost is shown as cheaper.
Worked example
RM500,000 home, 10% down payment, 4% loan over 35 years, 1% maintenance, 3% house price growth, RM1,800 monthly rent rising 3% a year, compared over 10 years:
- Monthly instalment (RM450,000 loan): RM1,992.49
- Home value after 10 years: RM671,958.19
- Net cost of buying: RM44,621.65
- Total rent over 10 years: RM247,619.79
- Difference: RM202,998.14, so buying is cheaper
If the rent were only RM200 a month, total rent would be far below the net cost of buying, so renting would be cheaper.
Why your number may differ
This is a simplified model. It excludes stamp duty, legal fees, insurance, and investment returns the down payment could have earned. House prices and rents are assumptions you choose, and the result is very sensitive to them.