| You need 20% down to avoid PMI, don't you? PMI is mortgage insurance if you don't have enough equity in your house. I'd guess that could run an extra 2-3 hundred per month. You're also missing homeowners insurance which would probably end up being close to $200/month for a 300k house. You ROI doesn't really make sense to me. You're paying a little over $1340 / month in interest, $200 for homeowners insurance, $312 in tax, and $200 for PMI. That's $2052 / month in housing costs where none of that money goes towards principle. Now depending on how you're doing your taxes, most of that is tax deductible, so lets say that's going to save you about 20% of that - $19,700 is the cost of your housing per year ($1,641 / month). Furthermore, 4% growth isn't guaranteed - especially with the current housing slump. The growth in housing experienced from the late 90's - early 2007 will likely not happen again anytime soon. I thought traditional growth was more like 2-3%. Plus, appreciation has to be considered in the long term. You need to pay capital gains if you sell the house within 2 years and any sunk costs on the house sitting vacant or realtor fees will lower your actual returns on the sale. So if the house is worth spending $1,641 / month vs. what you could rent for $1,641 OR you plan on living in that house for a significant period of time where the fixed cost of ownership becomes valuable, then buy. If not, renting is still the better option. For young people who aren't stable and might be moving around, I just don't see the benefit of home ownership, especially in today's uncertain housing market. Once you're ready to settle down, home ownership is a better idea. |