sdcellar, you’re right, in this context, interest paid actually doesn’t really matter since it does get canceled out by the decrease in purchase price. I did leave out one variable that would change this calculation though, and that’s the price of rent and how long it’ll take to get to $500k and 7.5% rate. Assuming it’s 3 years, if you buy today @600k @5.5%, in 30 years from today you’ll own your house free and clear. If you wait 3 years, then you’ll own your house free and clear in 33 years. Assuming you’re paying $2500/month in rent for a place that’s going for around $600k today, that’s $90k in rent you paid over those 3 years. That would make things a lot more gray and not so black and white. $90k(extra rent) + $66k(extra interest assuming 28% tax bracket) but that get offset by $20k less in down payment + $100k less in purchase price and $43k less in taxes. So, adding it up, it’s almost a wash.
There’s a lot of assumption in these calculation and it would change drastically if your assumption is different than mine. But things are not always black and white.
