I didn’t consider property taxes since it’s kind of a wash with interest deduction, IIRC.
$2400 P&I, $450 PMI, $250 for 401K loan (for the 5%), $100 for insurance.Assume his rent is $2200/mo. Assuming no HOA, or MRs.[/quote]
Assuming the taxes and tax write-off are a wash.
This totals 3100.
However, $550 + per month is principal … and the 401K loan is being paid directly to his retirement account.
Of course there is opportunity cost (or alternatiuvely a benefit if the retirement account declines during the loan payback period) in the 401k loan.
But these numbers, with PMI come pretty close to Rent + a car payment.
My rule of thumb for a new homeowner is if you can buy a house for rent plus a modest car payment in San Diego, it’s worth driving your old beater of a car.
If he can come up with the cash to eliminate PMI, it seems more than reasonable to buy, given those numbers.
