If they ever can the mortgage interest deduction...

[Okla-homey]

would fewer people buy their homes?

That's my opinion. What do you guys think?

[Frozen Sooner]

Simply?

Yes.

[yermom]

pretty sure i wouldn't have when i did...

[OUHOMER]

A few might, but i would think most people want the American dream. own your own home with the white picket fence.

Now the ones buying the $500,000.00 plus homes might re think buying such a large home. But us poor folk would still buy.

[Tulsa_Fireman]

I'd get my balls smashed in taxes if I did.

[Preservation Parcels]

For years, buying a house has been the closest thing to a sure-fire investment. Then, the bottom dropped out of the real estate market in way too many places. Unless someone knows they can stay long enough to ride out the low times, it may be much less expensive to pay the taxes, rent, and leave than to try to unload a house under duress. That happened to a cousin, and they lost about $100K just to get out from under the mortgage on a house across country from a current job.

[Curly Bill]

Yup, one of the main reasons to own a home is the tax benefits.

[SoonerInKCMO]

And if fewer people did own their homes, would it affect society in any appreciable way? At the small levels of change that removing the tax deduction would lead to, I don't think so.

[mdklatt]

Here's a related question. Why should we being subsidizing home owners in the first place?

[Curly Bill]

Here's a related question. Why should we being subsidizing home owners in the first place?

Same reason we subsidize people that have kids I guess, meaning I don't know???

[Frozen Sooner]

Here's a related question. Why should we being subsidizing home owners in the first place?

Home ownership is in line with public policy goals.

[mdklatt]

Yup, one of the main reasons to own a home is the tax benefits.

Does it make that much of a difference? It's a deduction, not a tax a credit, and it's only on the interest. What percentage of a typical house payment is interest?

[mdklatt]

Home ownership is in line with public policy goals.

In what way?

Another question: Is there a maximum limit on the duduction, or is McMansion ownership in line with public policy too?

[Curly Bill]

Does it make that much of a difference? It's a deduction, not a tax a credit, and it's only on the interest. What percentage of a typical house payment is interest?

Depends on the amount of the loan, for how long it is, etc...Early in the life of the loan most of what you're paying is interest, and not so much towards principal.

[Frozen Sooner]

Does it make that much of a difference? It's a deduction, not a tax a credit, and it's only on the interest. What percentage of a typical house payment is interest?

Depends on where you are in repayment.

Typically, only figuring P&I, a good rule of thumb is to add up 1 through the number of payments to get a denominator. The first monthly payment is about 1/denominator towards principal. The second is 2/denominator towards principal, etc.

It's not super-precise, but it gives an approximation.

[olevetonahill]

Does it make that much of a difference? It's a deduction, not a tax a credit, and it's only on the interest. What percentage of a typical house payment is interest?

At the begining about 95% of the payment goes to interest :D

[Harry Beanbag]

Does it make that much of a difference? It's a deduction, not a tax a credit, and it's only on the interest. What percentage of a typical house payment is interest?


Ours was about 66% last year.

[Frozen Sooner]

In what way?

Another question: Is there a maximum limit on the duduction, or is McMansion ownership in line with public policy too?

In the way that home ownership is considered good by a consensus of the electorate.

[SoonerInKCMO]

I don't remember getting to vote on that. :mad:

[mdklatt]

In the way that home ownership is considered good by a consensus of the electorate.

In other words, the approximately two-thirds (http://www.danter.com/statistics/homeown.htm) of Americans who own their homes consider it good that the other third* gets to help them pay for those homes. :D



*Not all of this third pays income taxes, some of them support the tax deduction because they want to buy a home some day, yadda yadda.

[Newbomb Turk]

Yup, one of the main reasons to own a home is the tax benefits.

never even considered it when I bought my house. I also didn't consider it when I paid off the house very early.

[mdklatt]

I also didn't consider it when I paid off the house very early.

Since you're only saving a fraction of the interest in taxes, you should pay it off as soon as possible.

[Newbomb Turk]

Since you're only saving a fraction of the interest in taxes, you should pay it off as soon as possible.

I couldn't seem to get that through to people when they said "but then you won't have the tax deduction...".

[mdklatt]

I couldn't seem to get that through to people when they said "but then you won't have the tax deduction...".

Those are probably the people who think charitable donations don't cost them anything because they're deductible, and who go ape**** about sales tax holidays even though they're saving less than they would during any ordinary sale.

[Frozen Sooner]

In other words, the approximately two-thirds (http://www.danter.com/statistics/homeown.htm) of Americans who own their homes consider it good that the other third* gets to help them pay for those homes. :D



*Not all of this third pays income taxes, some of them support the tax deduction because they want to buy a home some day, yadda yadda.

Nah, not even that. Home ownership is considered part of the "American Dream." It's kind of part of the reason we give farm subsidies. Americans have a story we tell ourselves about how we live our lives and our public policy reflects that.

[Frozen Sooner]

And if it makes you feel any better, up until the mid-80s it was all interest payments that were tax-deductible, not just mortgage.

[royalfan5]

Nah, not even that. Home ownership is considered part of the "American Dream." It's kind of part of the reason we give farm subsidies. Americans have a story we tell ourselves about how we live our lives and our public policy reflects that.
Also, on farm subsidies created loads of cheap grain and food to ply reluctant third world(and second world, too) countries with. That made it more politically expedient as well.

[Chuck Bao]

First of all, I think that is a noble public policy. I think everyone should get the chance to own their own home / condo unit.

If home ownership gets too expensive, I wouldn't be opposed to the government building massive new condo blocks in urban areas with connecting mass transit projects. I know that the American experience hasn't been so good with these projects, but the Asian experience has.

In my opinion, it shouldn't be about tax breaks, but the state making sure that housing is affordable by increasing supply.

This whole current mortgage crisis could have been averted if housing prices didn't get crazy in the first place.

[mdklatt]

And if it makes you feel any better, up until the mid-80s it was all interest payments that were tax-deductible, not just mortgage.

Jesus, no wonder Reagan broke the bank....

I'm probably 60/40 in thinking that the mortgage deduction is a good thing, and I fully support deductions for student loan interest. However, I'm sick of paying for other people's kids. Supporting public education is one thing, but the deduction needs to go. You want 'em, you pay for 'em.

[mdklatt]

This whole current mortgage crisis could have been averted if housing prices didn't get crazy in the first place.

There are as many winners as losers in the mortgage crisis, aren't there? Plummeting prices and foreclosures mean that people who couldn't afford a house before can now swoop in and take them from all the irresponsible bastards.

[Frozen Sooner]

There are as many winners as losers in the mortgage crisis, aren't there? Plummeting prices and foreclosures mean that people who couldn't afford a house before can now swoop in and take them from all the irresponsible bastards.

Unfortunately, the cost of credit is going up to reflect the higher default rates. The net benefit to first time homeowners isn't as great as you might think.

[mdklatt]

Unfortunately, the cost of credit is going up to reflect the higher default rates. The net benefit to first time homeowners isn't as great as you might think.

The cost of credit is probably going to overshoot where it needs to be, but it was obviously too low for the past few years.

:les: BRING ON DECENT CD RATES!!

[Curly Bill]

I'm sick of paying for other people's kids. Supporting public education is one thing, but the deduction needs to go. You want 'em, you pay for 'em.

We don't agree on much but I'm with ya 100% on this one! :D

[olevetonahill]

Jesus, no wonder Reagan broke the bank....

I'm probably 60/40 in thinking that the mortgage deduction is a good thing, and I fully support deductions for student loan interest. However, I'm sick of paying for other people's kids. Supporting public education is one thing, but the deduction needs to go. You want 'em, you pay for 'em.

Yup we need to dump the welfare, food stamps , free kids health. all that other Lib crap .

[Curly Bill]

Yup we need to dump the welfare, food stamps , free kids health. all that other Lib crap .

I'm with you 100% as well. :D

[Chuck Bao]

There are as many winners as losers in the mortgage crisis, aren't there? Plummeting prices and foreclosures mean that people who couldn't afford a house before can now swoop in and take them from all the irresponsible bastards.

No, no, no. There are far, far, many losers. There has been a huge wipe out of wealth. You can't turn it to the bright side that people can just about now buy the home of their dreams, because they can't. That isn't happening and won't happen for many reasons, including Mike's comment that credit isn't there.

Capitalism doesn't work all the time for every sector. I believe that there are natural monopolies, like telecom, electricity, water, etc. Basically if the private sector can't do the job, the public sector must. In this case, build more houses!

[mdklatt]

Yup we need to dump the welfare, food stamps , free kids health.

Taxpayer money going to subsidize middle and upper class kids is wrong. Taxpayer money going to subsidize poor kids is unfortunate, but preferable to letting them starve in the street.

[Chuck Bao]

Yup we need to dump the welfare, food stamps , free kids health. all that other Lib crap .

Nice. American kids on the street, begging for food? Third world country, we are.

[mdklatt]

There has been a huge wipe out of wealth.

How so? Your house isn't worth anything until the day you sell it, so as long as you didn't get foreclosed when your ARM reset, you haven't "lost" anything no matter how much the value of your home fell. If anything, you should be paying less property taxes now. People buying houses so they could flip them took it in shorts, but speculation was part of the problem in the first place.

[olevetonahill]

Taxpayer money going to subsidize middle and upper class kids is wrong. Taxpayer money going to subsidize poor kids is unfortunate, but preferable to letting them starve in the street.

You're the one who said if Ya gonna have kids then you should be the one paying fer em :P

[mdklatt]

You're the one who said if Ya gonna have kids then you should be the one paying fer em :P

I was specifically talking about the income tax deduction for kids. Most people who are claiming that can afford to take care of their kids without it. Poor people squirting out kids that they can't afford is a huge problem, but I'm not going to hold that against the kids themselves.

While we're on the subject, the right winger position of being anti-abortion and anti-birth control is contradictory to their position of being anti-welfare...unless they're going to accept poor kids dying in the streets.

[olevetonahill]

I was specifically talking about the income tax deduction for kids. Most people who are claiming that can afford to take care of their kids without it. Poor people squirting out kids that they can't afford is a huge problem, but I'm not going to hold that against the kids themselves.

While we're on the subject, the right winger position of being anti-abortion and anti-birth control is contradictory to their position of being anti-welfare...unless they're going to accept poor kids dying in the streets.

That aint what you said tho . I think your flip floping :D

[Chuck Bao]

How so? Your house isn't worth anything until the day you sell it, so as long as you didn't get foreclosed when your ARM reset, you haven't "lost" anything no matter how much the value of your home fell. If anything, you should be paying less property taxes now. People buying houses so they could flip them took it in shorts, but speculation was part of the problem in the first place.

I'm sorry, but what?

You don't think people generally have a sense about their own net worth and their home value and that feeling of security and future income would not influence their spending?

I saw that wipe out of national wealth in Thailand after the '97 Asian economic crisis. It may be different in the US, but people, generally, know when they've been tapped out.

[Harry Beanbag]

That aint what you said tho . I think your flip floping :D


The only thing worse than a socialist is a selfish hypocritical socialist. :)

[Curly Bill]

The only thing worse than a socialist is a selfish hypocritical socialist. :)

What if they were also a Muslim? :P

[Chuck Bao]

The only thing worse than a socialist is a selfish hypocritical socialist. :)

I have to say that I agree.

I mean the opposite doesn't quite work. You can't say that the only thing worse than a capitalist is a poor capitalist. I already tried that.

[Harry Beanbag]

What if they were also a Muslim? :P

I don't know, that's too much for me to even comprehend. ;)

[Frozen Sooner]

The cost of credit is probably going to overshoot where it needs to be, but it was obviously too low for the past few years.

:les: BRING ON DECENT CD RATES!!

Ain't happening soon. Banks are trying to manage their spreads to absorb losses, not attract deposits.

[Curly Bill]

Ain't happening soon. Banks are trying to manage their spreads to absorb losses, not attract deposits.

No kidding, I rolled over a CD the other day. I should have just taken the money and put under the mattress.

[mdklatt]

You don't think people generally have a sense about their own net worth and their home value and that feeling of security and future income would not influence their spending?


I guess I can only speak for myself, and theoretically at that because I rent, but this seems like a psychological issue more than a financial issue. The only two times your house has an actual value is the day you buy it and the day you sell it. Everything in between is theoretical. It's an investement, not a checking account. I mean, I don't base my spending decisions in the present based on the value of my retirement accounts, because that's not real money to me yet.

However, I do agree that this will affect people's spending habits, even if I see no rational basis for this.

[Harry Beanbag]

I guess I can only speak for myself, and theoretically at that because I rent, but this seems like a psychological issue more than a financial issue. The only two times your house has an actual value is the day you buy it and the day you sell it. Everything in between is theoretical. It's an investement, not a checking account. I mean, I don't base my spending decisions in the present based on the value of my retirement accounts, because that's not real money to me yet.

However, I do agree that this will affect people's spending habits, even if I see no rational basis for this.


I would think a person's home would have a lot of value when it's paid off and you retire in it. Paying rent during retirement would be the suck.

[mdklatt]

I would think a person's home would have a lot of value when it's paid off and you retire in it.

At that point it's worth whatever you would otherwise be paying as a house payment/rent somewhere else, which is independent of the actual market value.

[Sabanball]

The MID is the one major incentive to own a home in this country. I live in a state that has the lowest property taxes of any other in the country and I will tell you that if that deduction is ever done away with, I will rent.

[Penguin]

Take it from a former home-owner. The benefit of any tax deduction is incredibly tiny compared to worrying about every tiny crack, tear, crunch, or leak.


I rent now and love it! Termites? The hot water tank exploded and took out half of the building? My place burns down? I get flooded by fifty hurricanes in a row?


Not my problem.


Equity versus risk? I will choose no-risk any day of the week.

[Vaevictis]

How so? Your house isn't worth anything until the day you sell it, so as long as you didn't get foreclosed when your ARM reset, you haven't "lost" anything no matter how much the value of your home fell.

Actually, it is worth something before you sell it. If it's worth more, you can secure a loan against it. Or, you used to be able to anyway.

So, my take is that the current conditions have resulted in:

(1) Reduction in the amount of value that is convertable to cash by loan or sale.
(2) A down market in both homes and credit have in many cases massively reduced liquidity.

Both represent a loss of wealth. In the first case, it's obvious. In the second case... well, you may be paper rich, but it doesn't mean a damn thing if you can't convert it into cash.

[Okla-homey]

While we're on the subject, the right winger position of being anti-abortion and anti-birth control is contradictory to their position of being anti-welfare...unless they're going to accept poor kids dying in the streets.

No, no. You have not been paying attention to Charlie Rangel. Those kids are the stuff of which our legions are composed for protection and expansion of the Empire. You know, "cannon fodder." Its all part of an elaborate and cunning plan. ;)

[Ike]

Take it from a former home-owner. The benefit of any tax deduction is incredibly tiny compared to worrying about every tiny crack, tear, crunch, or leak.


I rent now and love it! Termites? The hot water tank exploded and took out half of the building? My place burns down? I get flooded by fifty hurricanes in a row?


Not my problem.


Equity versus risk? I will choose no-risk any day of the week.

Until your landlord gets foreclosed on...

But yeah, the risk to us there is maybe a few thousand dollars, max.

[Okla-homey]

Take it from a former home-owner. The benefit of any tax deduction is incredibly tiny compared to worrying about every tiny crack, tear, crunch, or leak.


I rent now and love it! Termites? The hot water tank exploded and took out half of the building? My place burns down? I get flooded by fifty hurricanes in a row?


Not my problem.


Equity versus risk? I will choose no-risk any day of the week.

FWIW, the [I]status quo /I] you describe is only a relatively recent occurence. For centuries, under the common law, the tenant was responsible for repairs, and if by some twist of fate a natural disaster destroyed the property -- it was on the tenant to rebuild AND continue to pay rent.

All these changes thanks to danged old liberal landlord/tenant law meddlers in the 20's and 30's.

[swardboy]

And if it makes you feel any better, up until the mid-80s it was all interest payments that were tax-deductible, not just mortgage.

....and that really put the brakes on credit card use, didn't it? :D

[Hamhock]

Here's a related question. Why should we being subsidizing home owners in the first place?

let's get something straight.

letting Americans keep their money instead of taking more from them in taxes is not a subsidy.

giving people money they never had in the first place is a subsidy.

[Hamhock]

I was specifically talking about the income tax deduction for kids. Most people who are claiming that can afford to take care of their kids without it. Poor people squirting out kids that they can't afford is a huge problem, but I'm not going to hold that against the kids themselves.

While we're on the subject, the right winger position of being anti-abortion and anti-birth control is contradictory to their position of being anti-welfare...unless they're going to accept poor kids dying in the streets.

so, i should have more of my money taken from me, than a deadbeat with the same amount of kids, just because i can afford it?

again, a tax deduction for my kids doesn't mean the government is giving me money. it means they're taking less of my money.

[Hamhock]

oh, and check Ike's thread for a reason to own your own home, exclusive of the tax deduction.

[mdklatt]

so, i should have more of my money taken from me, than a deadbeat with the same amount of kids, just because i can afford it?

Unless you want the deadbeat's kids starving in the street.



again, a tax deduction for my kids doesn't mean the government is giving me money. it means they're taking less of my money.

What it really means is that they're taking more of my money because of your kids. It's a zero-sum game. Lower taxes for one group means higher taxes for everyone else. How about we give Prius owners a $10,000 deduction? No skin off your nose, right? They're just paying less taxes, and what's wrong with that?

[Hamhock]

Unless you want the deadbeat's kids starving in the street.

the poor in America have no idea what poor is.

there's a long way to go between what we have now and "kids starving in the street". Besides, if you let most of up pay less in taxes, our respective charitable organizations will do even more to help the poor, and do a much better than the government.




What it really means is that they're taking more of my money because of your kids. It's a zero-sum game. Lower taxes for one group means higher taxes for everyone else. How about we give Prius owners a $10,000 deduction? No skin off your nose, right? They're just paying less taxes, and what's wrong with that?

you are exactly right. it is a zero sum game. the politicians have us so focused on who's paying what in tax that we don't spend enough time focusing on how the government is spending it. my point is that it is only a zero sum game because the notion of cutting spending is so foreign.

[Ike]

oh, and check Ike's thread for a reason to own your own home, exclusive of the tax deduction.

Hamhock, yeah, our situation is a decent reason for owning a home. However, there are also reasons not to own a home. At the most, I might be on the hook for a few thousand (security deposit plus an overlapping months rent) due to my current situation. Its a few thousand I'd rather have in the bank to be sure, but on the same level, I don't have to worry about fixing the dishwasher...or fixing the fireplace, or fixing the multitude of things that are wrong with the house I am living in (according to my neighbors, the previous tenant was, umm, a *tad* violent and destructive...it's quite obvious that there was already quite a bit of patch-work fixing before we moved in...our landlords handyman is quite another story)...anyway...I don't have to worry about a lot of things that a homeowner might when it comes to maintenance. When **** around our house breaks, I tell the landlord, and sometimes he fixes it promptly...other times, well, like the dishwasher, he drags his feet...as long as it really doesnt affect our life too much, I don't really care (and the dishwasher doesn't because we have a backup thats ours). We'll be moving across the pond next year anyway, so for us, it's more about just living right now and having fun while we can in the US. If we owned the home, I'd feel like I have to get on these things immediately before the build up...which could likely put me on the spot for well more than I am currently facing, and potentially more often.

Renting certianly isn't "the answer", but IMO, neither is owning. Everyone should weigh the plusses and minus of both as it relates to their current situation. Sometimes it makes sense to buy. Sometimes (like basically the next 5 years of my life), it makes sense to continue to rent. Yeah, I'd rather own a home...but with the moving soon, and the part of the world I'm moving to, owning just isn't really an option that fits our means.

[mdklatt]

you are exactly right. it is a zero sum game. the politicians have us so focused on who's paying what in tax that we don't spend enough time focusing on how the government is spending it. my point is that it is only a zero sum game because the notion of cutting spending is so foreign.

Spending has nothing to do with it. If you and I are splitting a check for $20, it doesn't matter whether I hand you $5 to help pay your half (a subsidy), or you decide $5 is all you're going to pay (a deduction). No matter what, I'm out $15 and you're only out $5. Splitting a $10 check instead of a $20 check doesn't change anything but the relative amounts.

[Hamhock]

Spending has nothing to do with it. If you and I are splitting a check for $20, it doesn't matter whether I hand you $5 to help pay your half (a subsidy), or you decide $5 is all you're going to pay (a deduction). No matter what, I'm out $15 and you're only out $5. Splitting a $10 check instead of a $20 check doesn't change anything but the relative amounts.

why shouldn't you pay $10 and I pay $10?

[Hamhock]

to answer the question: No, my desire to own my own home is not changed by the tax treatment of mortgage interest.

you can't deduct vehicle interest, but people still buy cars.

[sooner_born_1960]

I mailed in my last mortgage payment last week. It has been a few years since the deduction helped at all (standard deduction has been better than I can come up with, itemizing). So, feel free to drop that deduction.

[Harry Beanbag]

Is a broken hot water heater really the reason that some of you are so against owning your own home? Seriously?

[Harry Beanbag]

At that point it's worth whatever you would otherwise be paying as a house payment/rent somewhere else, which is independent of the actual market value.


You've really got the blinders on in this topic. Say I own a home and you rent. We're the same age and both retire at 65 and die on the same day 20 years later. You're paying $1500 rent, conservative estimate for ~30 years in the future. I'd say my house is worth around $360,000. Of course that is extremely simplified and ignores multiple issues, but that seems to be the way you want to look at it.

[yermom]

Is a broken hot water heater really the reason that some of you are so against owning your own home? Seriously?

if that's all you are worried about you are in for a surprise at some point :D