4 ms·

Getting a mortgage is the easiest way to build wealth through government subsidized leverage (mortgage interest deduction).

JetAlone 5y ago
There are 3 good replies to this one giving a decent analysis for why I might want to reconsider my position. It's hard to pick which one to answer to. Would you say that mortgage is probably driven down 8% because just can't afford the down payment anymore, or people like me who seem to have an irrational aversion to it?
- ilikehurdles 5y ago
  Is 8% referring to Rocket Mortgage layoffs? Over the last two or so years, mortgage rates hit historic lows, which meant the demand for cheap mortgages increased significantly, both from people wanting to enter the market and those refinancing. Consider that the $500k mortgage that would have cost $2300/mo in 2019 suddenly costs like $1600/mo in 2021. Absolutely I jumped on that train, as many others did. Lenders were overwhelmed and had to hire a lot to meet this demand. If you missed that window, well rates are above what they were pre-pandemic, looking back at least a decade, so refinancing for lower payments no longer makes sense for most borrowers. People still are buying homes, but high prices and that disappeared “once-in-a-lifetime deal” are going to suppress demand.
  - JetAlone 5y ago
    It wasn't the right time to buy for me, for a handful of reasons, got no resentfulness over it. I don't know what my local market is like, or is going to be like.
    - bombcar 5y ago
      The "right time to buy" is way more important based on your personal circumstances than almost any other consideration. Until you're sure you want to be in the same area for 10+ years, I wouldn't even bother considering buying, let alone determining which house you want to live in for 10+ years. Which is why you often see houses being purchased by new families, the kids are the first thing that really begins to put down roots (as you don't want to move them from their school/friends).
ferdowsi 5y ago
After the 2017 tax reform bill, itemizing deductions is not cost effective for the vast majority of Americans.
- lotsofpulp 5y ago
  Vast majority being 90% according to IRS statistics. It seems it will take some time for the myth of the effects of the mortgage interest tax deductions to die down. It is also capped at $750k of mortgage debt, which is not much for the 10% of filers who are itemizing and using the deduction.
  - mrep 5y ago
    If you are single it can definitely help. My deduction was 25k between SALT and the mortgage interest deduction vs 12,400 for the standard.
- thebean11 5y ago
  I wonder how the numbers look if you only look at Americans with mortgages though?
Sohcahtoa82 5y ago
First off, it's a deduction, not a credit. You're still spending money. Second, your mortgage interest (plus other deductions) need to be high enough to warrant itemizing deductions. At the start of 2021, my mortgage balance was $270K with a rate of 2.275%. Even including a $7,000 donation to charity, it wasn't enough for my wife and I to itemize. That said, it's much better to mortgage than pay cash for reasons outlined already in this thread.
- kortilla 5y ago
  > First off, it's a deduction, not a credit I literally said “deduction”. Who did you think you were replying to?

JetAlone 5y ago

There are 3 good replies to this one giving a decent analysis for why I might want to reconsider my position. It's hard to pick which one to answer to. Would you say that mortgage is probably driven down 8% because just can't afford the down payment anymore, or people like me who seem to have an irrational aversion to it?

ilikehurdles 5y ago
Is 8% referring to Rocket Mortgage layoffs? Over the last two or so years, mortgage rates hit historic lows, which meant the demand for cheap mortgages increased significantly, both from people wanting to enter the market and those refinancing. Consider that the $500k mortgage that would have cost $2300/mo in 2019 suddenly costs like $1600/mo in 2021. Absolutely I jumped on that train, as many others did. Lenders were overwhelmed and had to hire a lot to meet this demand. If you missed that window, well rates are above what they were pre-pandemic, looking back at least a decade, so refinancing for lower payments no longer makes sense for most borrowers. People still are buying homes, but high prices and that disappeared “once-in-a-lifetime deal” are going to suppress demand.
- JetAlone 5y ago
  It wasn't the right time to buy for me, for a handful of reasons, got no resentfulness over it. I don't know what my local market is like, or is going to be like.
  - bombcar 5y ago
    The "right time to buy" is way more important based on your personal circumstances than almost any other consideration. Until you're sure you want to be in the same area for 10+ years, I wouldn't even bother considering buying, let alone determining which house you want to live in for 10+ years. Which is why you often see houses being purchased by new families, the kids are the first thing that really begins to put down roots (as you don't want to move them from their school/friends).

ferdowsi 5y ago

After the 2017 tax reform bill, itemizing deductions is not cost effective for the vast majority of Americans.

lotsofpulp 5y ago
Vast majority being 90% according to IRS statistics. It seems it will take some time for the myth of the effects of the mortgage interest tax deductions to die down. It is also capped at $750k of mortgage debt, which is not much for the 10% of filers who are itemizing and using the deduction.
- mrep 5y ago
  If you are single it can definitely help. My deduction was 25k between SALT and the mortgage interest deduction vs 12,400 for the standard.
thebean11 5y ago
I wonder how the numbers look if you only look at Americans with mortgages though?

Sohcahtoa82 5y ago

First off, it's a deduction, not a credit. You're still spending money. Second, your mortgage interest (plus other deductions) need to be high enough to warrant itemizing deductions. At the start of 2021, my mortgage balance was $270K with a rate of 2.275%. Even including a $7,000 donation to charity, it wasn't enough for my wife and I to itemize. That said, it's much better to mortgage than pay cash for reasons outlined already in this thread.

kortilla 5y ago
> First off, it's a deduction, not a credit I literally said “deduction”. Who did you think you were replying to?