Is it always better to have a mortgage

Uber
LaCroix4u

Go to company page Uber

LaCroix4u
Apr 16, 2018 22 Comments

I read something recently that year one of a 750k mortgage would net you 17k on an average interest rate in tax deductions? Can anyone verify this or share similar experience?

The reason I ask is that it seems if one had the cash to buy a 1MM home in Bay Area it would be better to mortgage 750k of it. Or am i missing something?

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  • Uber
    Gmie27

    Go to company page Uber

    Gmie27
    The problem is you have to pay more if you are not an all cash buyer. As a seller, I would prefer $1.7m all cash = $1.8m zero contingency = $2m 1week contingency
    Apr 16, 2018 2
  • Amazon / Eng
    n0v

    Go to company page Amazon Eng

     n0v
    A 750K mortgage @4.25% gives 31K interest during the first year. Then, it decreases every year. 31K in interest is worth $10,850 assuming a 35% tax rate. But even that is too high. Because a married couple could have $24,000 in basic deductions that is foregone when itemizing. Let's assume you have $31,000 in interest, $10,000 in property tax and $2000 in other itemizeable expenses. So (31,000+10,000+2,000-24,000)*.35 = $6650. It's really not worth that much!
    Apr 16, 2018 6
    • Google
      Facebook

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      Facebook
      But the standard deduction would be only 12k, no? So according to your formula, there should be a bigger upside?
      Apr 17, 2018
    • Amazon / Eng
      n0v

      Go to company page Amazon Eng

       n0v
      Your wife not working doesn't automatically reduce standard deduction. Married, filing jointly stays at $24,000. I think head of household is $18,000. Maybe it gives you relatively more value that way.
      Apr 17, 2018
  • Why would someone want to pay 35k to save 11k? That's a loss of 24k
    Apr 16, 2018 3
  • Netflix
    NetflixEmp

    Go to company page Netflix

    NetflixEmp
    It is better to mortgage. Mortgage interest rates are less than compared to the returns you get even by investing in index funds. Also the tax benefits is something to consider very seriously. 750k in mortgage saves you around 15k an year. Also the risk is always with the bank who owns most of the home.
    Apr 16, 2018 0
  • Uber
    broforce

    Go to company page Uber

    broforce
    You are losing standard deductable and need to go itemized on your return.
    Apr 16, 2018 0