Unlike renters, 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, say, $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%. 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.