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I'd be willing to bet that if we eliminated the home mortgage interest deduction completely it would barely move the needle of what homes people choose to buy or the number of renters vs. owners. I would love to see the numbers, though.
Until I can afford a down payment [in a location I like] you can put up as many carrots as you want, I still can't cough up the dough to even think about them.
Certain homeowners with a mortgage could, almost overnight, go underwater with their home and on the other end homes could become more affordable under a smaller price point.
Above all, it is inefficient. By subsidizing bigger, more expensive houses, the policy misallocates scarce savings away from productive investments that raise living standards through income- and job-creating innovations. It also makes our financial system more vulnerable: as we wrote in an earlier post, it encourages people to take on risks – in the form of large, subsidized mortgages – that they are not equipped to bear. In the recent crisis, risky mortgage debt was sufficient to put the entire financial system at risk.
http://www.moneyandbanking.com/commentary/2015/6/3/why-the-m...
[1] Time to get on my customary soapbox: spend less, save more! You'll be happier today, and much happier in the future.
[2] Back on the soapbox: If you're an American making a professional salary, have no debt and are not maxing out your IRA and 401(k) contributions, there will be a moment in your future when you do the retrospective calculation on how much more money you would have if you had done so and be very sad. :) Minimize regret, and save more today!
Why is it somehow bad that people who are investing their money in the place where they live - thus becoming more responsible citizens than renters who can just pack up and leave - are getting a small bonus for it?
Earlier quoted context omitted.
Until I can afford a down payment [in a location I like] you can put up as many carrots as you want, I still can't cough up the dough to even think about them.
Look into FHA loans. You can have a pretty low down payment.
When I crunched the numbers for the mortgage interest deduction it really didn't seem that compelling. It replaces the standard deduction so the first 12,500$ in mortgage interest does nothing for you. After that it's just a minor reduction in taxable income and your tax burden is only reduced by a fraction of your mortgage interest. Not enough to cover the costs of maintaining a home and the tendency to consume more…
Earlier quoted context omitted.
Until I can afford a down payment [in a location I like] you can put up as many carrots as you want, I still can't cough up the dough to even think about them.
Look into FHA loans. You can have a pretty low down payment.
I don't know of anyone who bases a home purchase decision on the mortgage interest deduction. Seriously location, school district, cost of home, time to commute, yard size, cost of HOA are all more important to everyone I know. In fact it has never come up in conversations about home purchases with my peer group.
To the extent it factors into the monthly payment people can make, it impacts all the things you list.