Buying a house

[TobDog]

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My understanding is that ALL of the interest on a mortgage is tax deductible.

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Your interest on income property is not, but for your residence it is with someone told me there are a few exceptions, but hardly ever occurs. I look at the tax-deductable interest and property tax as getting a discount, because your still paying it, you just get to deduct it (what you pay) from your income, it makes your house lie getting a discount on rent, we all have to pay to live somewhere, my house payment is less than the average rent in my county for a 2 bedroom apartment.

Remember, the government never gives anything away for free, where do you think they got it in the first place, they stole it from the Russians when they weren't looking? NO, the US taxpayers paid for it in the first place.

And purchasing has one additional benefit, I have a fixed rate loan, except for a marginal tax increase(California has a capped growth rate) I know what my payment will be 25 years from now, renters dont have that luxury.

[x2ski]

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I think this is a simple generalization that can't accurately be made. So I don't sound like an egotistical jackass, I had the same opinion three years ago. Problem now is when that correction comes, it will set you back maybe a year or two, and those who made purchases back then will still be better off than a bargain hunter waiting for the "collapse."

While regional real estate markets will suffer (i.e., I wouldn't touch Palo Alto or any waterfront property in Palm Beach), demographics in other areas such as metro-NY/NJ suburbs dictate demand for housing will remain strong despite external factors such as rising interest rates.

Many years of trying to outmaneuver stock markets, bonds, and real estate have taught me that asset/market timing is futile versus the benefits of getting in and realizing the value of compounding at an early age with a long time horizon.

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Wow... that went right over my head, but it sounds awesome.

[RunDownHouse]

In addition, when the real estate market has a "downturn," historically prices have not fallen much. Instead, volatility suffers. This is an interesting yet logical concept. If your home falls from $200k to $100k, you aren't going to sell it. You'll simply wait for a better price, especially since you're still gaining value from its use as a residence. Out of 37 years of data on median prices of existing homes, prices only declined outright in 3 quarters. Outright drops in numer of sales were much more frequent and larger in quantity. The most striking example of this was the early 80's. Interest rates soared, incomes were stagnant, and the housing affordability index dropped below 100. Yet housing prices trended upward slightly. Volume, however, dropped 55% from 1978 to 1982.

Houses aren't like cars or appliances or other durable goods. Homeowners can simply wait, for the most part. There are always exceptions, such as someone being transferred to a different city, but those are just that: exceptions. All this talk of a real estate "bubble burst" is largely nonsense.

[ScottTheFish]

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you are also forgetting about the other benefits. such as tax deductions on your loan, the fcat that your house is growing in value, while the bank actually owns most of it etc....

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I'm with you on that, leverage can be a powerful thing. But look at it this way: If you were sitting in a paid for house, would you borrow against it to invest in the stock market? That's in effect what you're doing by not paying on the mortgage.

Maybe you would, many with a high risk toleraence have done it. But it's not for me. It's not a black and white issue, financial experts debate this like we debate raising AJo UTG [img]/images/graemlins/tongue.gif[/img]

As far as tax advantage to having a mortgage goes, it's nice, but it's not a reason to keep a mortgage if you have the means to pay it off. The math doesn't work. I have to pay 10K in interest to save 3K in taxes. I'll let Uncle Sam have his 3K and I'll pocket the other 7K. [img]/images/graemlins/smile.gif[/img]

[IlliniRyRy]

Yeah get the no doc loan. My poker playing friend just bought a house with that deal, I think he put 20% down and has a very low variable interest rate, like 5% or something. You don't need to prove your income if you go no doc, so don't worry about trying to make it look like somethin else. They don't ask for documents, they just look at your credit score.