For most people, the purchase price of a home has nothing to do with how they pay for it. In practice, buyers are budgeting month to month, just like renters. I put together the following table to build up the cost of ownership to include all of the things a rental would include – In the case of condos, it’s pretty convenient because a lot of the insurance and utilities costs are rolled into the condo fee.

A $300k loan implies around $2,100 in monthly housing costs. However, the principle component of the payment reduces your debt, so you don’t really lose that money since you retain the equity in your home. To have the equivalent in a rental you could rent for $1,700 and put $400 into savings. As time goes on and more and more of the loan is amortized the principle portion of your payment grows and the equation increasingly favors buying. After 5 years, it’s like renting for $1,600 and putting $500 into savings – and that’s assuming no rent increases for 5 years!