<p>I discovered many years ago that our mortgage interest payments and other deductibles did not exceed “standard deduction.” When I discovered we were in a standard deduction mode, we rapidly paid off the mortgage (interest was no longer to our advantage.) I would guess that since many of us have been in our homes a long time, not have a business, that mortgage deduction is a lost cause. Two things worked to our disadvantage, rising wages and decreasing mortgage. </p>
<p>The best thing that I have found for reducing income tax is the student interest deduction (PLUS). Student interest reduces gross income dollar for dollar. </p>
<p>I imagine that someone can do a spreadsheet to determine the optimization curve for mortgage interest vs income vs home size.</p>
<p>I perfectly well understand that the $1 million dollars is the maximum loan amount. Figure out the amount of interst over the life of a 30-year-loan, and you have the total amount of the “trickle-up”.</p>
<p>mini, it is not as simple as adding up the interest over the 30 yrs. Check the instructions for Schedule A: the amount of the deduction may be limited based on the AGI, and if you throw the AMT into the tax equasion, the math becomes even more complex. As thisoldman pointed out, the tax deduction mostly benefits the families with lower AGIs with newer mortgages when their house payment is 95% interest and 5% principal. And who would those families be? I highly doubt people buy houses just to have a mortgage deduction. :)</p>
<p>And BTW, I have no pity for the so-called real estate “investors”. Have you noticed how all those house flipping shows quietly disappeared from the TV listings? A house’s primary purpose is to provide shelter, warmth and a place to raise a family, not a wad of cash.</p>
<p>“Historical Housing Price Increases
Respected economist and best selling author Robert Schiller claims that real home price appreciation has averaged 0.4% annually plus inflation from 1950-2004. Schillers study accounts for the fact that a house built in 1950 is built very different than a house built in 2004 (sq. footage, features, etc.) (2005). This is the difference between comparing statistically median or average house valuations and any single house. The average single house has grown slower than statistically average house prices (which keeps increasing in size and quality).
For the purpose of objectivity and to confirm Schillers findings a separate study is considered. Glaeser, Gyourko & Saks show that US average home prices had risen by 1.7% plus inflation from 1950 through 2000 (2005). However, they clearly state in the papers abstract that much of the increase reflects housing quality. Their study does not compare the selling prices of a similar quality and size house in 1950 and 2000. It is for this reason the two studies seem fairly closely to each others findings, and seem close to accurate.
Schillers methodology, in my opinion, closely reflects the average long term annual price increases the owner of a house should expect in the long term: 0.4%, plus inflation, more or less.”</p>
<p>All these subsidies and this is the best housing prices can do?</p>
<p>Saturday night British funnies are over now. Back to the sideshow. </p>
<p>All of the profit in a loan is upfront either in the fees or in the interest in the early years of a loan. If the loan goes too long, the interest in diminished by inflation.</p>
<p>OMG, statistics. dstark, what does it all mean?</p>
<p>thisoldman, now wonder banks keep pestering homeowners with their offers to “refinance”! They (the banks) figured out a way to get those fees more often.</p>
<p>The term bailout is a loaded term suggesting that tax payers will be footing the bill for profligate home owners. I remember when the term was used during the NYC, S&L and Chrysler fiscal crises decades ago. However the government came up with creative finacing plans to help them survive, plans which benefited NYC/Chrysler/S&L’s and the country at large in the long run. All notes were paid in full and on time and the worst was averted.</p>
<p>I am certain that the same can happen here. It serve nobody to allow a minor crisis spiral into a catastrophic one. Essentially everyone will be hurt financially and emotionally if we sink into a prolonged economic recession/depression. I am certain that there are creative ways to structure short term mortgage refinancing so as to minimize further economic impacts while avoiding recreation of the housing bubble. In truth, the reduction in housing pricing is a good thing, a return to some normalcy and a solution should not impact that to any significant degree.</p>
<p>FWIW, I am a homeowner who has been debt free for more than a decade so I have no financial interest in a government/private recovery plan.</p>
<p>So this is really interesting about foreclosures.These home loans have been sold so rapidly through the system that when the holder is asked to prove he holds the loan he can’t because finding the papertrail is like a needle in a haystack. It will be interesting watching this play out. Who pays?</p>
<p>dstark: what can you tell us about credit default swaps? From what I understand this is the insurance to back up the insurance that keeps our assets safe from companies that go under and that these are in major trouble to the tune of trillions.</p>
<p>"It sounds like you are lucky too, but your judgement on others is harsh. People make mistakes in marriage and love, just like they do in real estate and the stock market. "</p>
<p>Lucky? I’m very lucky that my parents are still together, that I received a great education, and that I’m healthy. But it’s not just a matter of luck that I never married a jerk, never had children and walked away from them, and never went broke sinking my whole life savings into a high risk business. </p>
<p>Maybe you know lots of people who are paying child support despite making wise decisions and despite putting their children’s needs first. I don’t. Speaking as a former legal aid lawyer, I think such people make up a small fraction of non-custodial parents in this country.</p>
<p>Adults who make serious mistakes in whatever area should accept responsibility and shoulder the consequences…they should not blame bad luck, and they should not expect a bailout from me unless the bailout is in the best interests of the larger society (as it may be with the subprime mess). That’s what the whole thread is about, in my view.</p>
<p>“I am certain that the same can happen here. It serve nobody to allow a minor crisis spiral into a catastrophic one. Essentially everyone will be hurt financially and emotionally if we sink into a prolonged economic recession/depression. I am certain that there are creative ways to structure short term mortgage refinancing so as to minimize further economic impacts while avoiding recreation of the housing bubble. In truth, the reduction in housing pricing is a good thing, a return to some normalcy and a solution should not impact that to any significant degree.”</p>
<p>I look at things a little differently. Losses exist. They are probably going to get larger. What is happening now is people are discussing who is going to eat these losses. Many of the plans being talked about are a way for the banks to get rid of their losses. The same with the homebuyers.</p>
<p>I want the banks and homebuyers to eat the losses. </p>
<p>I agree that a reduction in housing prices is a good thing. Home prices are too high compared to income.</p>
<p>Why do you have it in so for banks and homebuyers? Banks’r’us - I own plenty of 'em in my pension fund and so does my mother, and they have lots of hardworking employees, tellers and mortgage people, etc. Why should we all have to suffer? And what about those homebuyers who just want to find a house to buy they can afford, and who we subsidize through our tax dollars?</p>
<p>But she made no choice to invest. She didn’t choose her pension fund, she didn’t choose how it is invested. She has absolutely no choice in the matter, and didn’t do anything wrong. So why shouldn’t the government which she helps elect assure that she doesn’t suffer? The people who live next door to the vacant home and who pay their mortgages didn’t choose to have their neighbor’s mortgage blow up - why should they have to suffer?</p>
<p>I just don’t understand how you can allow your bitterness toward bank decisions destroy the country.</p>
<p>Well, I for one, am furious. The banks/CEO’s made trillions off this scheme and now I am expected to help not only them on their feet but also the people who speculated on real estate. My 401 K suffers but the teachers pensions are guaranteed so I have to foot that bill (again) too.</p>