Mark Solis

I love to give my renters or first time homebuyers the "rent vs buy worksheet". It helps them determine the advantages of home ownership versus renting. Basically you add the monthly cost that you would have if you bought a house: ie Loan pmt (P&I) and property taxes, insurance and mortgage insurance. Of those costs your monthly interest payment and property taxes are deductible. When you add those figures together and multiply by your tax bracket %-ie: 28%-that is the amount you can deduct from the actual monthly expense to get your "after tax housing expense". So your actual housing expense is your total expense less your tax bracket percentage of those deductions. Compare that number to your rent. I explain that of course you must be able to make the total payment as you don't realize the savings until you do your tax return-and you must itemize to get them. Also this formula does not figure in any dollar value of appreciation/depreciation. Since prices have dropped so dramatically in the past year we hope to see only appreciation going forward. Another thing you can't count on is your rent remaining the same. Once you lock into a fixed loan the only variable is your taxes. You are always going to have housing expense, so ask yourself whether you want to make payments for your landlord or for yourself. Just don't get in over your head by buying what you can't afford. You still have to live-make sure your house payments don't exceed what you're comfortable with so you have money to go out to dinner and a movie or enjoy your favorite activity. - Thu Apr 2 2009, 11:24