If you're currently paying a hefty monthly rent on your house or apartment, consider buying a house. Keep in mind that buying a house isn't always a good idea — in fact, when you're strapped for money and/or in debt, it may be a terrible idea. You may have trouble qualifying for a mortgage, and you might end up paying more (in the short term) for a house in property taxes, homeowner's insurance, maintenance, and repairs.

Assuming you can qualify for a mortgage (and it's always a good idea to get pre-approved by a lender — a process that's usually free), consider the following two situations that make financial sense when you're thinking of buying a house:

• You can mortgage a house that has some repair and maintenance needs on a 15-year loan for 60 percent (or less) of what you pay now.

• You can mortgage a new, quality house for 15 years for the same or a little more than you're paying now.

In the first situation, you'll see an immediate improvement in your financial situation, but down the road, you may incur maintenance and repair costs that can add up. In the second situation, you won't see much of a change in your immediate financial picture, but you'll reap major benefits in the future.

Why the emphasis on 15-year loans? Because so much more of your payment goes toward principal (instead of interest) with a 15-year loan, so you can build a substantial amount of equity in your home in just five years. With a 15-year loan, you'll pay off over 23 percent of your debt in the first five years. With a 30-year loan, you'll pay off just under 6 percent in those same five years.

WORKSHEET 8-2 helps you decide whether buying is better than renting for your specific situation. Note: This worksheet does not take into account the potential tax savings associated with home ownership.

WORKSHEET 8-2

Buying Versus Renting

*Keep in mind that your rent is likely to rise sharply over the next 30 years!