One of the many great financial benefits of home ownership is that interest from home mortgages is tax deductible.  Or I should say that it is for now.  As our federal deficit grows by staggering proportions, our government advisers and committees must think of creative ways to pay it back.  Last year over $130 billion was saved by U.S. tax payers writing off their Mortgage Interest Deductions (MID).

Not that I have looked at any proposals personally, but proposals are being thrown out on eliminating/reducing these deductions.  It’s no secret that this would deincentive home purchasing, but how many people would even put it near the top of their list of reasons to buy?   I know it wasn’t near the top of mine, but I can say that if I couldn’t write that off next year, I would be slightly less enthusiastic about owning a home.  I can also say I would be much more afraid to finance most of a home purchase, let alone for a decent home.  Most renters would of course rather see MID go than increases to other taxes that they can’t avoid.  I think that this would namely tax the middle class also, because the rich would more likely pay their house off to avoid a mortgage in the first place without this incentive, which can be tens of thousands of dollars easily for them.

One of my larger concerns is if MID goes away, how will those who are already surviving the financially tough times cope come tax time in years to come?  Many people admit that this saved money helps them pay their rising property taxes, along with other home ownership related problems.  I would predict many more people deciding to let their houses go into foreclosure.   I have brought this up with other real estate professionals over the past couple weeks, and had every reaction from “it would be the end of America as we know it”, to “it would definitely change real estate and buying, but I’m not sure how much.”

Please give me your opinion on Mortgage Interest Deductions.  How would you react if tomorrow you found out your mortgage insurance wouldn’t be deductible from taxes?  Would you buy again?  Would you sell your home now?

Merry Christmas!

~Nate Bock and The Steve Bock Team