Buying first house

re:
A tax deduction by itself isn't a reason to buy a house, and certainly not a reason to carry an unnecessary mortgage. You need to look at the whole picture.

You can get a tax deduction just by losing money, but who wants to do that. Remember a deduction always costs more than it pays. You paid $1.00 in interest to get a 30 cent deduction. Not exactly a winning formula BY ITSELF. Does it reduce the cost of borrowing money? Sure. That's simple math.

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The above is pretty simplistic while purporting to be basic wisdom...

Actually, having a generous mortgage to defray taxes, especially at higher tax brackets, has traditionally been fairly basic personal financial planning-- which I teach at a 4 year college.

For 7 straight decades from 1938 thru 2008, home values rose steadily on average nationally, generally often from 5-7% a year. Ergo, when you borrowed the mortgage $, the guvment effectively subsidized your investment in a home, whereas the guvment taxed earnings on other investments like stocks and corporate bonds. We are the ONLY free country that so heavily taxes interest on savings, stocks, etc. The primary source of retirement asset accumulation for most families was in home equities-- FOR 70 YEARS! Ergo, the ONLY form of debt recommended in most texts has been mortgage debt, especially when rates are VERY low as they have been for some years now.

What queered the traditional housing investment for everybody from 2009 until the trough in late 2011 was the result of the PC Left's egalitarian idea that what had prevented the lower 1/3 socio-economically from joining the middle class was that they could not get mortgages.

Ergo, they came up with the swell theory of mortgages for everybody, regardless of true capacity to pay or creditworthiness. Part of this facile theory was that rising values would allow those who could not pay simply to sell and come out whole.

Banks were told to significantly increase CRA lending or mergers would not be approved, and the banks would be put on bad lists for lack of commitment to their communities. The guvment encouraged aggressive lending by all of the non-bank lenders (think Citywide Mortgage, Quicken Loans, etc.) whose practices were WAY TOO LOOSE. But again, the theory was that the Fannie Mae, etc., guarantees would keep the system solid. Instead, $ MEGA-BILLIONS of loans were extended to those who never should have had them, so the values of ALL homes plummeted.

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Buying first house