tag:blogger.com,1999:blog-7642929222753173260.post1275665919287585217..comments2023-08-12T02:43:38.927-05:00Comments on Free Market: Mortgage interestFreeMarkethttp://www.blogger.com/profile/12640525471233108791noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-7642929222753173260.post-31772149835134832932009-02-27T17:42:00.000-05:002009-02-27T17:42:00.000-05:00I do agree with your last thought about an investm...I do agree with your last thought about an investment that might have a better rate of return than the mortgage rate. I knew I had forgot something in my take on this. <BR/><BR/>I doubly agree that there are few investments these days offering a 5% rate of return. I'd be happy with 1%, or anything better than the -15% I've been hit with over the last year. COL (cry out loud)!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7642929222753173260.post-73160189101618210162009-02-27T12:21:00.000-05:002009-02-27T12:21:00.000-05:00The point is this: assuming you have a marginal ta...The point is this: assuming you have a marginal tax rate of around 30%, an additional dollar in mortage interest expense only costs you 70 cents. The mortgage interest deduction essentially gives everyone a 30% off sale on their mortgage rate. Lowering the price of something causes people to consume more of it, which played a role in the mortgage crisis.<BR/><BR/>It actually does make sense to hold a mortgage as long as possible if you can get a higher return on your money elsewhere. Why pay off a 5% mortgage early when you can invest in the stock market and get 10% over the long haul? I know, that is not a good argument with the performace of the stock market as of late :-)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7642929222753173260.post-17679078039241887942009-02-26T16:55:00.000-05:002009-02-26T16:55:00.000-05:00FM - I think that's an interesting way of looking ...FM - I think that's an interesting way of looking at it, but I can't quite agree 100% with you on your pespective or the article writer's perspective. If I am misunderstanding the point, accept my apology in advance. <BR/><BR/>It is true that a more expensive house, or a mortgage with a higher finance rate would both enable someone to have a bigger tax write off, but there's more to this than the up-front numbers. Tax write offs are not the same as tax refunds. If I claim $1000 in write offs, my tax debt is only reduced by (approx.) $300 (depends on my income bracket). I don't get a 1:1 rate of return on the write off.<BR/><BR/>If people are actually buying a bigger house or purposely accepting a loan with a higher rate just to get a bigger tax write off, that makes no sense. Thay are essentially a lot more in expenditures to a get little more back in taxes. A bad "investment" strategy in my opinion.<BR/><BR/>Similarly, I know of people who actually want to keep a mortgage as long as possible so they have a tax write off. Again, this makes no sense to me since you don't get a 1:1 return. If I could afford to pay off my mortgage early, and lose that tax write off, I would. The money I could save each month by not having to make a mortgage payment at all far outweighs the loss of my tax write off benefit.Anonymousnoreply@blogger.com