"Does it Save me Money to Rent or Buy Real Estate for the Same Monthly Amount?"

Someone asked me this question a week or so ago and I thought I'd try and answer it the best I can.

Let's say, for instance, that the amount we're talking about is $2000 for the sake of simplicity. Should you be spending $2000 on rent every month or should you be making monthly mortgage payments of $2000 every month?

My answer: you'd be better off buying a house and making mortgage payments, provided you plan on living in the home for at least five years and getting a fixed rate mortgage.

Amongst the biggest reasons for this are: the tax benefits of homeownership and protecting yourself against increases in rent.

All your mortgage interest payments are tax deductible if you itemize and most homeowners itemize on their tax returns. In fact, beginning this year, you can even itemize your Private Mortgage Insurance payments. (Private Mortgage Insurance is usually required by lenders if you have less than 20% down payment.) You have no such benefits from your rent payments. Sure, California gives you a rent credit of between $30 and $60 on your state return, but that is phased out at higher incomes, whereas for the most part you can claim your mortgage interest on your federal taxes.

Rent increases are all too common. The landlords usually increase the rent to keep up with inflation every year. And you could never convince someone like me to rent - because I consider it literally throwing money down the drain.

The only time it makes sense to rent a place is when you either cannot get qualified for a mortgage - in which case you would work to build your credit score while you rent - or if you're not sure how long you intend living in a certain area.

Hope that answers the question.