Proposed Mortgage Interest Deduction Phase Out?

[UCGal]

Interesting.

But… to take a different view…

* This might encourage prices to go down.

* 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.)

[Nor-LA-SD-guy]

All this would do is put more money into the hands of people who invest in cash flow rentals,

OK more people would probably rent instead of buy and that may drive down property price for a while, but in the end it will just put more money into cash flow rental investors.

Choose your poison …

[Nor-LA-SD-guy]

All this would do is put more money into the hands of people who invest in cash flow rentals,

OK more people would probably rent instead of buy and that may drive down property price for a while, but in the end it will just put more money into cash flow rental investors.

Choose your poison …

[Nor-LA-SD-guy]

All this would do is put more money into the hands of people who invest in cash flow rentals,

OK more people would probably rent instead of buy and that may drive down property price for a while, but in the end it will just put more money into cash flow rental investors.

Choose your poison …

[Nor-LA-SD-guy]

All this would do is put more money into the hands of people who invest in cash flow rentals,

OK more people would probably rent instead of buy and that may drive down property price for a while, but in the end it will just put more money into cash flow rental investors.

Choose your poison …

[Nor-LA-SD-guy]

All this would do is put more money into the hands of people who invest in cash flow rentals,

OK more people would probably rent instead of buy and that may drive down property price for a while, but in the end it will just put more money into cash flow rental investors.

Choose your poison …

[(former)FormerSanDiegan]

[quote=Nor-LA-SD-guy]All this would do is put more money into the hands of people who invest in cash flow rentals,

OK more people would probably rent instead of buy and that may drive down property price for a while, but in the end it will just put more money into cash flow rental investors.

Choose your poison …[/quote]

Good point … amd this is a point people fail to grasp.

Currently, the price point at which a home makes financial sense as owner occupied is higher than when considered as a cash flow rental. If the owner occupied mortgage deduction is eliminated, the price point at which property becomes favorable to own as a rental will kick in at a higher price point than where it pencils out as owner occupied. In the long run this does not favor renters who would-be owners. In fact it would raise the differential between renting and owning. The reason is that interest is accounted as a business expense, not a deduction. The long-term equilibrium would tend to favor investors rather than renters who seek to become future owners.

[(former)FormerSanDiegan]

[quote=Nor-LA-SD-guy]All this would do is put more money into the hands of people who invest in cash flow rentals,

OK more people would probably rent instead of buy and that may drive down property price for a while, but in the end it will just put more money into cash flow rental investors.

Choose your poison …[/quote]

Good point … amd this is a point people fail to grasp.

Currently, the price point at which a home makes financial sense as owner occupied is higher than when considered as a cash flow rental. If the owner occupied mortgage deduction is eliminated, the price point at which property becomes favorable to own as a rental will kick in at a higher price point than where it pencils out as owner occupied. In the long run this does not favor renters who would-be owners. In fact it would raise the differential between renting and owning. The reason is that interest is accounted as a business expense, not a deduction. The long-term equilibrium would tend to favor investors rather than renters who seek to become future owners.

[(former)FormerSanDiegan]

[quote=Nor-LA-SD-guy]All this would do is put more money into the hands of people who invest in cash flow rentals,

OK more people would probably rent instead of buy and that may drive down property price for a while, but in the end it will just put more money into cash flow rental investors.

Choose your poison …[/quote]

Good point … amd this is a point people fail to grasp.

Currently, the price point at which a home makes financial sense as owner occupied is higher than when considered as a cash flow rental. If the owner occupied mortgage deduction is eliminated, the price point at which property becomes favorable to own as a rental will kick in at a higher price point than where it pencils out as owner occupied. In the long run this does not favor renters who would-be owners. In fact it would raise the differential between renting and owning. The reason is that interest is accounted as a business expense, not a deduction. The long-term equilibrium would tend to favor investors rather than renters who seek to become future owners.

[(former)FormerSanDiegan]

[quote=Nor-LA-SD-guy]All this would do is put more money into the hands of people who invest in cash flow rentals,

OK more people would probably rent instead of buy and that may drive down property price for a while, but in the end it will just put more money into cash flow rental investors.

Choose your poison …[/quote]

Good point … amd this is a point people fail to grasp.

Currently, the price point at which a home makes financial sense as owner occupied is higher than when considered as a cash flow rental. If the owner occupied mortgage deduction is eliminated, the price point at which property becomes favorable to own as a rental will kick in at a higher price point than where it pencils out as owner occupied. In the long run this does not favor renters who would-be owners. In fact it would raise the differential between renting and owning. The reason is that interest is accounted as a business expense, not a deduction. The long-term equilibrium would tend to favor investors rather than renters who seek to become future owners.

[(former)FormerSanDiegan]

[quote=Nor-LA-SD-guy]All this would do is put more money into the hands of people who invest in cash flow rentals,

OK more people would probably rent instead of buy and that may drive down property price for a while, but in the end it will just put more money into cash flow rental investors.

Choose your poison …[/quote]

Good point … amd this is a point people fail to grasp.

Currently, the price point at which a home makes financial sense as owner occupied is higher than when considered as a cash flow rental. If the owner occupied mortgage deduction is eliminated, the price point at which property becomes favorable to own as a rental will kick in at a higher price point than where it pencils out as owner occupied. In the long run this does not favor renters who would-be owners. In fact it would raise the differential between renting and owning. The reason is that interest is accounted as a business expense, not a deduction. The long-term equilibrium would tend to favor investors rather than renters who seek to become future owners.

[Zeitgeist]

The article said this has generally been a no go zone and I would imagine some of his large contributors would like to keep things status quo. It could also do damage to a struggling real estate recovery and pitch the economy further into a deepening recesssion. Unless that is an outcome they would like in 2010, with so many in Congress up for reelection, I do not think this plan will be embraced. It sounds too much like an attack on the upper middle class and may not play well.

[Zeitgeist]

The article said this has generally been a no go zone and I would imagine some of his large contributors would like to keep things status quo. It could also do damage to a struggling real estate recovery and pitch the economy further into a deepening recesssion. Unless that is an outcome they would like in 2010, with so many in Congress up for reelection, I do not think this plan will be embraced. It sounds too much like an attack on the upper middle class and may not play well.

[Zeitgeist]

The article said this has generally been a no go zone and I would imagine some of his large contributors would like to keep things status quo. It could also do damage to a struggling real estate recovery and pitch the economy further into a deepening recesssion. Unless that is an outcome they would like in 2010, with so many in Congress up for reelection, I do not think this plan will be embraced. It sounds too much like an attack on the upper middle class and may not play well.

[Zeitgeist]

The article said this has generally been a no go zone and I would imagine some of his large contributors would like to keep things status quo. It could also do damage to a struggling real estate recovery and pitch the economy further into a deepening recesssion. Unless that is an outcome they would like in 2010, with so many in Congress up for reelection, I do not think this plan will be embraced. It sounds too much like an attack on the upper middle class and may not play well.

[Author]

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