There is a general claim that renting means throwing away your money, but the numbers show that it is the best short term solution.

This topic has been much debated, claiming that paying rent each month is practically throwing away money and that it’s almost the same as paying off a mortgage loan. However, with a calculator in hand, we can state the opposite, at least when it comes to short and medium terms.

Let’s take a general example. We have a two-bedroom apartment in Los Angeles with a price of $450,000 and an interest rate of 5.5 percent for 30 years. Let’s assume that the apartment rents for $1,750 a month, with an annual increase of 3 percent during the 30 year mortgage loan period.

With this scenario in mind, and assuming that the house is refinanced at an average of 4 percent during the 30 year loan period, the numbers indicate that prior to eight years, buying a home is not as economically compensating as renting.

According to the New York Times mortgage calculator, you would only save $40.149 the first year and the numbers will decrease with time.

Now that the numbers are clear, we can have an understanding of the myths that exist about renting versus buying a home. There are five main myths.

The first claims that renting is throwing away money. This is false. Those who throw away money are the people who buy homes because during the first few years all they do is pay interest for the privilege of having been given a loan.

Those who rent, on the other hand, don’t pay interest, property taxes –which would come out to $6,000 a year for a $450,000 home-, community or maintenance taxes, or a price that is approximately 30 percent higher than the actual rent.

With the difference in money, which is a vast amount, you can invest in the stock market, bonds, or mutual funds, which have a better annual return than refinancing a home during an economic crisis.

The second claims that there are economic benefits for homeowners. True but not true. It is true that homeowners receive a tax deduction but false to see that as an advantage, since they pay more property taxes than an average tenant.

The third myth claims that mortgage payments are the same as rent. This is also not true. Usually, a mortgage payment is 30 percent more than rent in the U.S. Also, buying a home requires thousands of dollars in down payment and closing costs, which require a quick refinance in order to recover what was invested during the first year.

The fourth claims that those who buy are haves, while those who rent are have nots. This is true, but not in this market, in which 50 percent of the people who bought a home in 2002 now owe more than the home’s actual value. Not to mention the millions of families throughout the country who lost their home in the current financial crisis.

The final myth claims that a home is a great investment. This is unquestionably true, although in certain cases and under certain circumstances. It is not a universal truth and this can be proven by taking a look at the current Real Estate market.

So, we can conclude that renting is the best option if it is for a short or medium term, that it is not mandatory to purchase a home, and that if you are a tenant, you are not throwing away your money. Those who buy pay much more, despite the fact that in 30 years they will possess the greatest treasure of all.