Buy a new house if the mortgage interest deduction is taken away?

[Peregrine Took]

Forget it - we'll just keep renting.

Its a shame, too, as we had just narrowed down our selection.

[SheilaT]

1. My decision to buy has always been based on

whether or not I can afford the house payment, not on any tax considerations. I bought my place two years ago, have no idea if I will move and purchase another home some time in the future, but in any event if I can't afford the payment in the first place, I can't afford the home.

It used to be that people could deduct the interest charged on consumer loans and on credit cards, and that was done away, and it hasn't stopped anyone from continuing to get various loans or use their charge cards.

[Wilms]

4. If the deduction leaves you with enough money to pay the mortgage, you CAN afford the home.

What am I missing?

[SheilaT]

8. I don't even look at the deduction when

considering what I can afford. Either I can afford the monthly payment up front or I can't.

People pay rent. Renters don't get a tax deduction on their rent. Many here recently have been saying there is no reason for anyone ever to buy a home, everyone should rent. Well, for any number of people renting does make more sense than buying. Renters either can afford their rent payment up front or they rent a cheaper place.

For what it's worth, my mortgage payment is about a hundred dollars a month less than what I was paying in rent the year leading up to my house purchase. If I could afford the rent, I could afford the mortgage.

I'm not sure what you are missing.

[Wilms]

9. From the point of view of your situation, my comment doesn't apply.

How common is your situation?

There are probably many who will pay more in mortgage payments than the rent they paid before purchasing. Viewed on a yearly basis, the mortgage deduction would be part of the pool of money available to help put it all together.

Not a big deal, really.

[SheilaT]

10. I honestly don't know. It seems to me that

it ought to be common. I was reading some stuff earlier today on the internets that pointed out something like 60 percent (maybe it was even more) of the mortgage interest deduction is taken by those earning more than $100,000. Which income puts people somewhere above the average or the median in this country.

If you can't itemize, you can't take the mortgage interest deduction. In the early years of a typical mortgage, that interest may actually make it possible to itemize. My accountant has told me that in my particular situation, I'll only be able to take the deduction for about five years. On a thirty year mortgage.

Personally, I think the very hardest part of being a first-time buyer is coming up with a down payment. Although in recent years that's been less and less necessary.

Whether rent is higher or mortgage payments are higher depends on a lot of things, not the least of which buyers are often persuaded to buy a larger and more expensive home precisely because of that deduction.

It's somewhat like buying a car, in that spreading the car loan payments over five years (and I'm old enough to remember when car loans suddenly went from three years to five years and I'm still horrified) makes the cost of owning a car seem quite reasonable. Unless you get yourself into a deal where you owe more than the car is worth. When I buy a car I buy second hand and I buy a lot less car than I can theoretically afford. Same with my house. When I was first considering buying (and I live in Santa Fe which is supposedly too expensive for anyone but a millionaire) one financial person tried to persuade me to go for an interest-only loan. I could have bought a house twice as expensive as the one I got, had I fallen for that trap. Nope. I put 20% down, and have a highly affordable (for me) house payment. To be fair and honest here, I had the money for the down payment because of sale of a previous home in a divorce. Nonetheless, I opted for a small place within my means.

I do have sympathy for those out there who can't seem to get ahead. It's VERY hard, and the less you have the tougher it is. Some years back I heard some NPR reporter who'd done a series on some very poor people saying that the only thing wrong with them was that they didn't have money. So when the crappy car broke down, there was no money to fix it. A trivial accident or illness meant not working, no money coming in, and of course no money to pay for medicine or treatment. It's a truly vicious cycle. Once you get even a little ahead, with reasonable planning and no unforeseen financial disasters (illness, accident, loss of job) it's not that hard to stay ahead. It's why we absolutely should have good safety nets: universal health care, good and long-lasting when needed unemployment benefits, genuine retraining programs for people whose jobs are going away. Stuff like that. Not endless tax cuts for the rich.

[proudlib8134]

13. good post

[Saturday]

2. I believe it is just for second (vacation) homes. nt

[riverbendviewgal]

3. We don't have that deduction in canada

but we do have socialized health care.....and lots of people own homes.

[damntexdem]

5. It's doubtful even if the deduction stays.

Mortgages, so home ownership, have become such a scam that it would be best to stay away.

[sinkingfeeling]

7. How? The interest rates today are among the best in the last 50 years. I would hate to

rent and not be able to paint the walls or decorate the way I wanted. I love adding value to houses and am proud to have completely restored my 153 year-old house.

[eilen]

6. The net effect of the elimination of the mortgage credit

will be to bring prices down.

[Philippine expat]

11. To equal the standard deduction (married filing jointly)

your interest payment would have to be $950 a month. In many parts of the country
thats more then your total payment including taxes and insurance

[demosincebirth]

12. In California, if we were starting out, we would never buy. With the property taxes,

mortgage, homeowners insurance and all the up keep, it's better to rent and bank all of the latter .