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I know that I’m cutting it a bit close to the end of tax season, but many people don’t pay extra on their mortgage for tax purposes.
To be honest, for a larger majority of people, deducting the mortgage interest really doesn’t matter very much. There are people who reap the benefits of this tax break, but a huge number of people really gain little if any benefit from doing this, especially if you take the standard deduction.
When you factor in the added stability of owning your home sooner, and not having to worry as much about steady employment, the benefit further shrinks. I’ve heard many arguments about how having a fixed mortgage is good because of inflation, the tax write-offs, but I value owning my home and the stability it provides at a much higher rate apparently.
The other thing to factor in is that the mortgage interest write-off is in the government’s cross hairs when it comes time to balance our budget. This may also affect any refinance programs that our government may help to subsidize. If the mortgage interest write-off gets axed, then there goes all potential advantages. I’m going to provide some pros and cons lists below to kind of summarize the values in my eyes:
Mortgage Interest Pros:
- Tax deductible
- Inflation will probably lower your true liability
- You can invest your extra money, but bear in mind that the ROI has to be higher than the mortgage rate and inflation to really be worth it!
Mortgage Interest Cons:
- You’re basically guaranteed the full 30 years of your mortgage.
- You won’t own as much of your house as quickly.
- Unless you do the math correctly, you may actually lose money rather than benefit.
- You’ll be more dependent on a steady flow of income.
A lot of the decision will come down to math skills, tax knowledge and your desire for stability. For me, I don’t find the deduction to be of much value when you compare it to the pros of owning your home. Additionally, my mind was further made up when I heard that it may be eliminated.
Some people argue that banks will fight its elimination, but I’m not much of a gambling man. The government needs money, and it will do what it must to get it. There are many more people out there who will disagree with me, but no one can say I’m wrong. If they do, then they greatly under-estimate how much I value my family’s stability.
At the end of the day, the mortgage interest deduction being worth it is a matter of opinion (assuming it works out in your favor mathematically), and it is up to you to decide, but I hope that I’ve helped to make the case for the less defended side.
Yes, mathematics plays a huge role, but it can’t really determine a qualitative value such as my desire for stability. If you receive an advantage by deducting your mortgage interest, great, but you must also try to determine how much you value owning your home, and the stability it provides. And, unless you’re an actuary, it’s tough to put a number on the US Government’s desire to eliminate the deduction.