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Answers (5)
- Dan, "the_country_hick"
- Contributions:4695
Kerry Ann, "If all of us in this post were interested and able to purchase a home for $100,000"
People getting a mortgage have the same rates available at the same time for the same fico scores. If you have poor credit that could deny your ability to get a mortgage or to increase the rates. That is the price you pay for abusing your credit.
"the original poster is able to get a 5% interest loan w... $500 per month and I'm able to only get an 8% interest loan which ...a little over $700"
I do know that going from 5% to 7% rates removes 23.7% of buying power. That means your 5% $200k mortgage payment shrinks to a 7% $153k mortgage payment.
"obviously that $100,000 home is going to be less affordable for me."
The loss of buying power will NOT change what a person is able to pay towards their monthly payment. It will instead cause a decrease in the prices of houses to reach the buying ability of buyers at that time. This is simple to understand and comes from economics 101.
I still have an amortization table from a book on the foundations of financial management from many years ago. I have used it a few times recently. Perhaps more realtors should pick up that kind of book before posting this kind of statement.
- KerryAnn Douglas, "KerryAnn Douglas"
- Contributions:68
Mortgage Tax Deduction? Did you mean Mortgage Interest Deduction? It's got to be one of the biggest deductions one can claim on income taxes. This is not one of the better ideas in circulation. I'm not clear on why the deduction would have anything to do with home prices. The interest rate any person is given is based on their credit score and income at a miniumum. The interest rate affects a person's purchase power. If all of us in this post were interested and able to purchase a home for $100,000, but the original poster is able to get a 5% interest loan which makes the P&I payment a little over $500 per month and I'm able to only get an 8% interest loan which makes my payment a little over $700 for P&I obviously that $100,000 home is going to be less affordable for me. Both of us will get from our lenders at the end of the year a statement showing the amount of interest paid throughout the year. I don't have time to pull up an amortization schedule to attempt to figure out how much each of our statements might read, but it will be more than a couple hundred dollars especially if you are in the early stages of your mortgage payments. Your property taxes are another deduction you may claim. I'm guessing that the property tax deduction might be small in comparison to the mortgage interest deduction. (I am not a tax preparer and have no intent to become one.)
- SteadyState
- Contributions:787
It does not help home buyers and tax payers because:
1. It artificially raises or maintains unsustainable prices on existing homes
2. Most income earners do not really benefit from the tax break (if you have a $1M loan then it may help - depends on the property tax in your area)
3. It takes away money from the tax payers that could be better used for other purposes - schools, elder care, cancer treatment, etc.
1. It artificially raises or maintains unsustainable prices on existing homes
2. Most income earners do not really benefit from the tax break (if you have a $1M loan then it may help - depends on the property tax in your area)
3. It takes away money from the tax payers that could be better used for other purposes - schools, elder care, cancer treatment, etc.
- Dan, "the_country_hick"
- Contributions:4695
The standard deduction does a lot more for the average or lower income buyer.
- SoCal_Engr
- Contributions:5666
When I was generating my Excel tables to determine how much house I could afford (or, if I could afford a specific house), part of this calculaution included the notioin of "effective tax".
I knew I'd be paying mortgage tax, properity tax, etc. However, I also knew that these would be at least partially offset by exemptions allowed in the tax law. At a certain level, I am ablel to take advantage of these exemptions because of other exemptions I take in my 1040A. However, loosing the mortgage tax credit stands everything I have ever known (or, thought I knew) about taxes and financial planning on it's head.
It will hurt, Fatal? Probably not. Flesh wound? Big one.
I knew I'd be paying mortgage tax, properity tax, etc. However, I also knew that these would be at least partially offset by exemptions allowed in the tax law. At a certain level, I am ablel to take advantage of these exemptions because of other exemptions I take in my 1040A. However, loosing the mortgage tax credit stands everything I have ever known (or, thought I knew) about taxes and financial planning on it's head.
It will hurt, Fatal? Probably not. Flesh wound? Big one.
How does the current mortgage tax deduction help homebuyers and homeowners?
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