Did you ever wonder who started the rumor, "that renting was a waste of money when you can invest towards home ownership?" Or maybe it was put to you like this, "Don't waste your money on rent!" We'll, folks have been buying real estate in Texas since Coronado paved the way for Spanish settlers who arrived in 1716. The Texas title trail officially began in 1835 when the Mexican Government was overthrown by the Republic of Texas. Of course back then land was 50 cents an acre! But the point is this concept is not a new one.

Let's just look at the basics here to understand why. First of all, you've got the possibility of real property appreciation. This is the equity that a home owner builds up as the general market prices go up. Just ask those folks out in California how they feel about property appreciation. Families who purchased their home 10 years ago have already sold out for exponential returns on their investments. Luck of the draw? Perhaps.

Although property appreciation is never a sure thing, some things are for the moment. For example, our current tax system offers a benefit of homeownership including deducting the mortgage interest and property taxes from their Federal income tax returns. The reasoning is simple, let's encourage home ownership and eliminate an area of double taxation as well. Why should we pay taxes on money received that went to pay taxes, i.e. property taxes?

You can see how these savings pencil by looking at the numbers. Take your average two bedroom home at $150,000. Let's say you decide to put 10% down at $15,000. Your total loan amount is $135,000. With a 30 year fixed mortgage at 6% interest, your monthly payment is $809. Of which, $675 goes towards interest and $134 goes towards principle in the first year. You can get these numbers by using a financial calculator, however for the purposes of this example; just take my word for it!

In addition to your mortgage payment, you will have a monthly property tax of $325 in this instance, upon a tax appraised value of $150,000 at a 2.6% tax rate. Tax rates and values vary depending on the county in which you live. This full amount is considered a deduction to your tax bill. Go ahead and factor approx. $150 per month for Hazard Insurance and minor maintenance. This brings your total pre tax payment to $1,284 per month. Make sense? This concept home that you are living has cost $15,000 down and $1,284 per month on-going to maintain.

Now the fun part, let's see what it all means. Mortgage Interest paid on the loan plus property taxes for the year equals $12,000. Both items are of course considered deductions to your income for Federal tax purposes. If the marginal tax bracket that you file within is 30%, your real dollar savings are $4,000 for the year. Keep in mind that the marginal tax bracket you pay within varies based on your annual household income. Those brackets currently range anywhere from 10%-35%.

If you spread that $4,000 savings over the year, your previous montly expenses has gone from $1,284 to a much more attractive $951!

Rumor or Reality? You be the judge!