[quote=SK in CV][quote=bearishgurl][quote=SK in CV]BG, what would be the circumstances where someone still employed could only use $4K to $7K or mortgage interest? Are you saying it’s in addition to their other home in their previous locale, and the total debt would otherwise exceed $1.1M?[/quote]
The homebuyer is leaving their job soon but hasn’t yet applied for “retirement” so his/her employer doesn’t know their plans. But they want to qualify for a mtg for their “retirement home” while still employed. In recent years, it has been too hard for a borrower to qualify for a prime mtg on excellent terms while “cash-rich” but not able to document enough income to qualify for even for a ~$200K mtg. Thus, it is better to attempt to qualify while *still employed* but just take out enough mortgage to generate a MID to shield taxable retirement income and investment income (usually lower than income while still working).
Native San Diegans residing in other counties/states who wanted to return to SD weren’t and aren’t stupid. When they saw and heard of properties in their “home turf” being listed at prices often at or below the land value, many jumped in with offers, all the while knowing they had to be “all cash” in order to “win” the bidding wars. They figured they could “refi” to a mtg they were comfortable with in “retirement” AFTER COE and successfully did so.[/quote]
So it actually has nothing at all to do with being able to use $4K to $7K in mortgage interest, only the amount of the mortgage they’re comfortable with?
If they’re seriously “cash rich” and collecting SS, then they would have no problem qualifying for a $200K mortgage. They’d need income of less than $35K a year.[/quote]
I would argue that they are taking out a mortgage in order to preserve cash because they think they can earn more on that money than what they are paying in interest.
Contrary to the realtor rhetoric about the “benefits” of MID, it never makes sense to spend a dollar in order to save 30-40 cents (and that’s if you’re earning a pretty significant income) on taxes.
