3 ms·

and, thanks to the mortgage interest tax credit, you probably will. Get rid of that though, and suddenly there's no economic incentive to own property. The MIT

by ouid 9y ago

and, thanks to the mortgage interest tax credit, you probably will. Get rid of that though, and suddenly there's no economic incentive to own property. The MITC is a hugely regressive policy.

johnbrodie 9y ago
I must be doing it wrong. We bought a house in AZ with a 15 year, 2.99% interest rate. The MITC made almost no difference, even for the first year where I was paying mostly interest.
- ouid 9y ago
  you need to spend more money on your house then.
- blobbers 9y ago
  You get back roughly 30% of your paid mortgage interest. But yes, you should have taken a 30 year fixed if you wanted a larger credit. Its free leverage.
  - vonmoltke 9y ago
    You'd need to have enough deductions to itemize without the mortgage interest deduction and be making well over six figures for that to be the case. I personally don't come close to itemizing without mortgage interest, so I was seeing far less than that. My wife and I combined were barely in the six figures (taxable) when we actually owned our house as well, so we got back about $1k in taxes on about $12k in interest.
  - AnimalMuppet 9y ago
    Paying more in interest in order to get more back on your taxes is a losing proposition.
    - kthejoker2 9y ago
      Not just more in interest, you're also reducing principal so there's some opportunity cost from an investment perspective. Really comes down to how long you intend to stay in the home.
vonmoltke 9y ago
> Get rid of that though, and suddenly there's no economic incentive to own property. How do you figure that? What about cost stability? What about not losing 100% of your payment (that is, retaining some as equity)? I'm not saying there is always an incentive; some markets favor renting over buying in spite of the MITD. However, saying the only reason buying is financially attractive makes no sense. Edit: corrected C (credit) to D (deduction), since it is technically correct and makes a big difference in it's usefulness.
- ouid 9y ago
  rental rates are exactly the same thing as interest rates (+/- wear and tear and so forth). what you retain in equity, you would equally retain by simply not paying into some other investment. There's nothing special about owning your home, there's no arbitrage to be had beyond the MITC.
  - vonmoltke 9y ago
    > rental rates are exactly the same thing as interest rates (+/- wear and tear and so forth). In what world? I have never seen a market where rents were below P&I for a comparably-priced house[1]. I would love to see a real example of this. [1] Note that this does not automatically make buying better, as rent factors many costs P&I does not.
    - ouid 9y ago
      Because if not there would be an incredible opportunity for arbitrage.

by ouid 9y ago

and, thanks to the mortgage interest tax credit, you probably will. Get rid of that though, and suddenly there's no economic incentive to own property. The MITC is a hugely regressive policy.

johnbrodie 9y ago

I must be doing it wrong. We bought a house in AZ with a 15 year, 2.99% interest rate. The MITC made almost no difference, even for the first year where I was paying mostly interest.

ouid 9y ago
you need to spend more money on your house then.
blobbers 9y ago
You get back roughly 30% of your paid mortgage interest. But yes, you should have taken a 30 year fixed if you wanted a larger credit. Its free leverage.
- vonmoltke 9y ago
  You'd need to have enough deductions to itemize without the mortgage interest deduction and be making well over six figures for that to be the case. I personally don't come close to itemizing without mortgage interest, so I was seeing far less than that. My wife and I combined were barely in the six figures (taxable) when we actually owned our house as well, so we got back about $1k in taxes on about $12k in interest.
- AnimalMuppet 9y ago
  Paying more in interest in order to get more back on your taxes is a losing proposition.
  - kthejoker2 9y ago
    Not just more in interest, you're also reducing principal so there's some opportunity cost from an investment perspective. Really comes down to how long you intend to stay in the home.

vonmoltke 9y ago

> Get rid of that though, and suddenly there's no economic incentive to own property. How do you figure that? What about cost stability? What about not losing 100% of your payment (that is, retaining some as equity)? I'm not saying there is always an incentive; some markets favor renting over buying in spite of the MITD. However, saying the only reason buying is financially attractive makes no sense. Edit: corrected C (credit) to D (deduction), since it is technically correct and makes a big difference in it's usefulness.

ouid 9y ago
rental rates are exactly the same thing as interest rates (+/- wear and tear and so forth). what you retain in equity, you would equally retain by simply not paying into some other investment. There's nothing special about owning your home, there's no arbitrage to be had beyond the MITC.
- vonmoltke 9y ago
  > rental rates are exactly the same thing as interest rates (+/- wear and tear and so forth). In what world? I have never seen a market where rents were below P&I for a comparably-priced house[1]. I would love to see a real example of this. [1] Note that this does not automatically make buying better, as rent factors many costs P&I does not.
  - ouid 9y ago
    Because if not there would be an incredible opportunity for arbitrage.