Renting vs. Owning
Unlike renting, homeowners get part of their monthly payments back at tax time. That’s because the mortgage interest they pay is (in most cases) fully tax deductible.
For a mortgage payment of $1,000 (principal and interest only), you could purchase a home for $151,426 if you put a 10% down payment on a 30-year loan at 8% (note: many can qualify for interest rates as low as 6%!).
If your payments started in January, your first-year mortgage-interest tax deduction would be $10,862.
Assuming you are in the 27.5% tax bracket, you would save $3,041 in taxes–that’s $249 per month. So the $1,000 payment mentioned earlier is really $751 when computing the homeowner’s tax advantage. +
