It’s an interesting concept. It’s probably not going to happen – it would be like messing with social security… political death for the politician that proposes it.
But…in the past mortgages tended to be 10-15 years – and serious down payments were put down. People had the radical idea of paying off the mortgage in full – not serial refinancing, extending out the debt. The idea that it’s ok to have a mortgage into retirement is pretty recent.
I look at my in-laws… When they bought their home – they put 30% down and had a 10 year loan. Their goal was to pay it off quicker than that. Even with 6 children and only 1 income for the duration of the mortgage they were able to scrimp and make extra payments… reducing their deductable benefit along with their principal.
My parents paid off the mortgage over 30 years – never refinancing. Had it paid off by the time I was out of college.
If you eliminate the mortgage deduction people will consider how much they leverage to buy a house. The downpayment percent will likely go up. People might actually pay off their houses.
A quick google turned up the fact that we’re one of only 4 western nations that has a mortgage deduction for personal homes… most of Europe doesn’t. Canada allows interest deductions on business properties – but not personal residences.
While the deduction is available, I’ll claim it. But I’m old school enough to be paying extra on my mortgage in an attempt to pay down my mortgage… tax deduction be damned.
