| What is mortgage interest? It is any interest you pay | | | | greater deduction. There can be limits to the tax |
| on a secured loan when you bought your first or | | | | deduction. Your tax deduction is limited if all |
| second home. The loans include the mortgage to buy | | | | mortgages on your home are either more than the |
| your home, a second mortgage, a line of credit or a | | | | fair market value of your home or more than one |
| home equity loan. The loan must be secured debt or | | | | million dollars ($500,000 if married and filing |
| it will be considered a personal loan and the interest is | | | | separately) |
| not deductible. | | | | The greater deduction would be the only advantage |
| For the average consumer who has managed to | | | | to the interest only loan as far as the taxpayer is |
| acquire credit card debt, car loans, and various other | | | | concerned, unless of course, they use the money |
| small debts, is the mortgage interest, especially with | | | | saved from the interest only loan to fund a 401k, an |
| an interest only loan an answer to mortgage interest | | | | IRA, or an MSA (that's a topic for a completely |
| deductions and the elimination of non-deductible | | | | different paper). The mortgage interest and especially |
| interest? | | | | the interest only loan is sold to the consumer as a |
| What options does the average consumer have in | | | | way to afford more house, pay off credit card debt, |
| accommodating the tax need in relation to the | | | | or provide a means to fund a savings of some kind, |
| housing need? What about the interest only loan | | | | and if that's true, it can be used for that purpose. |
| option on a new house mortgage? Today's housing | | | | And if you're considering paying off those high |
| and mortgage market has seen a tremendous | | | | interest credit cards, the mortgage interest you're |
| growth in mortgage packages, variety and amount. | | | | charged on the interest only loan is fully tax |
| The mortgage interest deductible on the interest only | | | | deductible, while the credit cards are not; a word of |
| loan option, once thought to have gone the way of | | | | caution, however, make sure you don't turn around |
| the Edsel automobile, is back today and in use by the | | | | and use those credit cards again, putting yourself |
| masses. The mortgage market has seen an | | | | right back where you started from, just with a |
| unbelievable increase in the interest only loans from | | | | bigger interest payment and less house equity. |
| just a mere sliver of the market a few years ago, to | | | | Why has the market experienced such growth? It's |
| around 25% of the market share today. That's huge | | | | not totally related to the income tax benefit; the |
| growth, especially when you talk less than five years | | | | home mortgages of today satisfy a common desire |
| to experience that growth. | | | | for the consumer: instant gratification of bigger and |
| What benefit does the mortgage interest (especially | | | | better. Such is the case when it's time to make |
| the interest only loan) bring to the table, and does | | | | those needed repairs, or house expansion. A second |
| this benefit the homeowner as a taxpayer? This is | | | | mortgage makes it possible to retain the same |
| one question the mortgage lender probably won't be | | | | monthly mortgage payment, and still pull a lot of |
| able to answer for you, and one you probably won't | | | | equity out of your home. This may sound like the |
| think to ask. But you should, because it's one | | | | ultimate solution, but is it really? It also adds to the |
| question that can make a difference to you and to | | | | amount of interest an individual can deduct at the |
| your federal tax return and the amount of the | | | | end of the year; and if income levels are growing, |
| mortgage interest that will actually provide you with | | | | the interest expense must grow in order to keep up. |
| a federal income tax deduction. A mortgage interest | | | | Now, this is a somewhat skewed way of looking at |
| deduction is one of the best financial reasons to | | | | the benefit of a mortgage, but it figures right into |
| purchase a home. Who gets the deduction? You do, | | | | the same scheme as the elimination of credit card |
| if you are the primary borrower, legally obligated to | | | | debt and saving for 401(k) s as a valid reason to |
| pay the debt and actually make the payments. If you | | | | borrow money against your home. |
| are married and both of you signed the loan then | | | | Remember that your home mortgage must be a |
| both of you are the primary borrowers. | | | | secured loan from your main home or second home. |
| The interest only loan and the amount of interest | | | | No deduction can be made for a mortgage from a |
| you can deduct on your income tax return are one | | | | third home, fourth home and so on. The mortgage |
| and the same if your income levels are low enough; | | | | and the resulting interest are great tools, when used |
| the concern for the average consumer is the total | | | | by the right people, in the right situation. For the |
| dollar value they get to take off their tax return. | | | | average consumer and long-term homeowner, unless |
| Quite often, the deductions for the consumer aren't | | | | you think a better deduction on your tax return is |
| enough to contribute to the bottom line, because the | | | | worth the forfeiture of equity in your home, you'd |
| income level the percentage of deductible interest is | | | | better think twice before re-financing with a second |
| calculated on is simply too high. Higher dollar amounts | | | | mortgage that generates more interest, but less |
| in interest will usually mean a greater possibility of a | | | | equity. |