Comments on: Mortgage Interest Tax Deduction? No, Thanks

By: Mortgage Interest | Mozilist

Mortgage Interest | Mozilist — Wed, 28 Apr 2010 14:14:05 +0000

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By: Craig/FFB

Craig/FFB — Wed, 07 Apr 2010 13:06:17 +0000

How about the existence of mortgages themselves? They inflate home prices as well. If we eliminate mortgages and pay cash for homes then home prices will plummet. Its the availability of cash, via mortgages, that raises home prices.

I don’t think you should buy a home for the deduction and paying into principle can save you thousands or more. But having the tax deduction there is a nice bonus. The idea, so I understand, is to help encourage people into buying homes.

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The Best Way to Invest in Real Estate - Consumerism Commentary — Tue, 06 Apr 2010 16:32:02 +0000

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Saturday Link Love: Spring Is in the Air | Rainy-Day Saver — Sat, 20 Mar 2010 18:50:54 +0000

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By: Financial Samurai

Financial Samurai — Fri, 19 Mar 2010 07:19:37 +0000

Here’s a case where the more you make, the more you save! The tax rate you pay on your highest dollar really starts making a difference after a certain amount.

Just think of your payments in cash flow terms and not total costs if it makes you feel better. You have to pay someone whether you own the place or rent.

By: Rainy-Day Saver

Rainy-Day Saver — Wed, 17 Mar 2010 15:53:01 +0000

@DanT: I’m aware of the point — even wrote a post about that position on mortgage payoff — but again, it’s only a POSSIBILITY that you can make that money back. My mortgage rate is 5%. It would take an average return of 8% on $200 invested monthly for the next 30 years to just BREAK EVEN on the mortgage interest payments made throughout that time. It’s a crapshoot either way!

By: DanT

DanT — Wed, 17 Mar 2010 03:54:42 +0000

You’re all forgetting one crucial point.

If you invest the additional money that you would put towards the extra principal, it will (hopefully) grow. If, over the 30-year term of the loan, it grows at (roughly) a rate greater than your mortgage, then that money will be MORE than the money you saved by prepaying the mortgage.

So for example, and these are entirely made up numbers, if you put $200 extra per month and that saves you $100,000 over the life of the loan, you could invest that $200 per month and end up with $120,000 or $150,000 etc.

There are plenty of calculators online where you can plug your real numbers in and see exactly what the difference will be after 30 years.

I understand those people who are leery of investing in the stock market and prefer the “safety” of paying off the mortgage early, but financially it actually ends up costing for that feeling of safety.

By: admin

admin — Sun, 14 Mar 2010 23:31:41 +0000

@Mr. Credit Card: Thanks for the textbook explanation. Sure, it looks good in a short-term view, but it’s not something I think should have been sustained for this long. It’s probably artificially pumping up housing prices, too.

By: Mr Credit Card

Mr Credit Card — Sun, 14 Mar 2010 01:31:20 +0000

I concur – the less deduction, the less distortions. I studied in economic class that in theory, a firm should be indifferent between equity and debt. But because of the interest deduction, it artificially lowers the cost of debt and companies find that it is "optimal" to have some debt! Once again, encouraging debt and distorting the economic world!

By: RainyDaySaver

RainyDaySaver — Sat, 13 Mar 2010 03:45:08 +0000

Yep, I'm in the 'expensive' portion of the state (northeast).