* This might encourage people to wait to purchase till they have bigger down payments.
I did some calcs – if you buy a house with a loan for $600k, at 6% for 30 years, you’ll pay $695k in interest. This might make people stop and think about taking out that large of a loan if only $500k of that $695k was deductable. I doubt many people look at how much interest is paid on 30 year home loans, though…
I also wonder how serial refinancing plays into this. If folks who keep refinancing, extending the length of the loan (and therefore the amount of interest paid in the end) will hit this point, even with smaller principals.
Whatever happened to saving up a sizeable down payment and paying off the loan as quickly as possible.
It’s not that long ago that ALL interest was deductable. Car loan interest, credit card interest, etc. 1986, Reagan signed the bill that eliminated those deductions. People cried that the world would end when they eliminated these tax deductions. It didn’t.
(I feel like an old man yelling “Get off my lawn” at the kids… but I really don’t get how people can be comfortable with such large debt. I’m old school – carry zero balance on credit cards, cars are paid for, and mortgage is on an aggressive payoff schedule – so I’ll be debt free.)
