The only on who benefits financially from a rent check is the landlord. Renters never see their monthly payments again, and they can't use any of that money as a tax deduction. Home buyers, on the other hand, spend part of their money every month on a asset they can eventually sell.  The remainder of their monthly outlay pays interest to their lender, which is fully tax deductible in most cases.

If you are currently renting - or you're moving and debating whether to rent or buy - take a look at how your housing payment could be put to better use purchasing a home. The real question may be whether you can afford not to buy a home.

Stabilize Housing Costs

As a renter. You may be subject to a rent increase each time your lease period expires. You can end up paying more and more every year for a place to live - with no limit and no financial return in sight.

Home owners who take out a fixed-rate mortgage, however, can look forward to the same monthly principal and interest (PI) payment  as long as they own their home. Even with an adjustable-rate mortgage, payments could increase if interest rates rise, but the increases would be "capped" to a maximum amount for each adjustment and over the life of the loan. (Will your landlord limit rent increases?)

Whether buying with a fixed-rate or an adjustable-rate mortgage, when the loan is paid off, homeowners enjoy a place to live with no required housing payment except, perhaps, for real estate taxes.

Add Up Tax Savings

While holding housing constant, most homeowners can also take an annual tax deduction for mortgage-interest expenses. The tax savings alone make the purchase of a home a wise financial decision for most people.

As an example, let's say your rent payment is (or would be) $1,000 per month. If you turned that into a mortgage payment, you could buy a home worth $175,000 with a 10% down payment on a 30-year mortgage at 6.25% interest. (Ask us about current rates to get a better picture about how much your rent payment could buy!)

The mortgage interest you would pay in our first year of home ownership would be $9,792. If you're in the 25% tax bracket, deducting your first year interest expense would save you $1,937 in taxes - $162 a month. That means your PI would really be $838 with the tax savings taken into account. After five years your tax savings would total almost $9,000.

Because your payment schedule is "amortized" so you pay the same amount every month, in the early years of your loan most of each payment will go toward paying interest, with only a small portion paying off principal (the loan amount). Still every month you pay less than the previous month toward interest and more toward the principal. As your interest expenses decrease over time, so will your annual tax savings, but your equity (owned value) in the home will increase.