The hardest thing to do is buy your first home.  The stress of making that initial big purchase and commit to payments can be daunting.  Saving up the money to make the purchase can seem enormous, and the idea of possibly paying more in a mortgage payment than you are in rent can seem like it doesn’t make sense to buy.  I was there once.

This article was sent to me that explains some of the benefits of buying vs. renting.  It is an excellent read:

Nearly a full third of households are still renting. If you’re one of them, you could be paying a hefty price.

It still makes sense to buy instead of renting.  In fact, renting may be costing you a bundle.

Let’s look at an example…
If you are paying rent at $1,500 per month and your landlord increases your payment by a modest 5% each year, you would wind up paying just about $100,000 over a 5-year period! Worse yet, after forking over $100,000, you still would have nothing to show for it.

And speaking of having nothing to show for it, how about any improvements you might make to a rental property? It’s not uncommon for renters to freshen up the paint, install new light fixtures or plant some nice flowers outside. But guess what… all your efforts, labor and the benefit of that improvement belong to the landlord, not to you.
With convenient down payment options still available for qualified buyers, affordable home prices and low interest rates, the very same money could have been used towards home ownership.

Even using a standard 30-year fixed program, a mortgage of $300,000 could be obtained with a total monthly mortgage payment—including property taxes and insurance—of around $2,200.  Assuming you are in a 25% tax bracket, this would be equivalent to the average amount spent on rent during the same period after your tax benefit.
And the benefits of home ownership are quite considerable. Because the mortgage is being paid down each month, equity is being built. After 5-years, the $300,000 mortgage could be reduced to $279,000, adding $21,000 to your net worth!  Not to mention your mortgage interest is deductable!

But if laying out the initial increase in monthly payment and having to wait for your tax benefit to show up next April is a tough nut to crack, the IRS wants to help. Instead of waiting to file for the tax benefits derived from your new home purchase, you can simply adjust the amount of your withholding. This allows you to have less tax withheld from each paycheck (puts more of your paycheck into your pocket) so you can handle the new mortgage payment more comfortably throughout the year. In essence, you are taking your tax refund as you go instead of letting Uncle Sam hold it all year, interest free.

Visit www.irs.gov and use the IRS withholding calculator. This very handy tool can quickly show you the impact that a change in withholding will do to your net paycheck. Remember to balance this with the expected refund and it is always a good idea to check with your tax advisor. 

Adjusting your with-holdings is one of the more important things to do.  When you buy a home and are able to deduct mortgage interest, if you don’t have any other offsetting income items, this typically yields you a significant amount more in a tax refund, if you don’t change your with-holdings (or the amount of taxes withheld from your paycheck).  Why let the government earn interest on your money?  You can essentially get that refund up front in your monthly paycheck, have more in your pocket throughout the year,  and be able to feel more comfortable making your mortgage payment.  Make sure to speak with your tax advisor to make sure you change your with holdings properly.