Which costs less — renting or buying?

Rent vs. buy

Compare the true net cost of renting versus buying a home over a chosen time horizon, accounting for equity and investment growth.

Formula

net cost of buying = (down payment + mortgage payments paid) − home equity at the end of the horizon · net cost of renting = rent paid − growth the down payment would have earned if invested instead

Assumptions

• Rent is assumed constant over the whole horizon — in reality rent typically rises over time, which would make renting relatively more expensive than shown.
• Excludes property tax (cukai tanah/pintu), maintenance, strata/management fees, and renovation costs on the buying side, and excludes rental deposits or agent fees on the renting side.
• Selling costs (agent commission, legal fees) if you sell the home at the end of the horizon are not included in home equity.
• Assumes home appreciation and investment returns stay constant for the whole horizon, which real markets rarely do.

Frequently asked questions

Why does buying still cost more even though I build equity?
Equity offsets the cash paid, but doesn't erase it — mortgage interest, and the opportunity cost of the down payment sitting in a house instead of invested, can still add up to more than a straightforward rent payment, especially in the earlier years of a mortgage when most of the payment goes to interest.

How much does the "expected home price growth" assumption matter?
A great deal — a small change in annual appreciation compounds significantly over a 10+ year horizon. Try a few different values with "Compare scenarios" to see how sensitive the answer is.

What if I don't know how long I'll stay?
Try the shortest horizon you're reasonably confident about. Buying tends to look worse over short horizons (upfront costs aren't spread out) and better over long ones — this crossover point is often the most useful number to know.