Mortgage Market Bound for Ruin Again

[mkarch]

Originally Posted by The_Bishop

Tens of millions, huh? That's simply piffle. First of all, many who refinance do so to tap into increased equity in their homes. That jacks the principal balance up, partially offsetting a declne in the interest rate. Second of all, refinancing resets the clock, meaning that interest goes back to being a large fraction of the total monthly payment. Third of all, these high-income and high-leverage households of yours already beat the standard deduction before they ever take mortgage interest into account. Obviously, you are not a member of this group, or you would have known that.

Cash out re-fi's are not common anymore. They were popular years ago but people who refinanced during the days of 3.5% mortgages did so at reduced values in a tight lending environment. I'm sure a few people increased the size of their mortgage, but it wasn't the norm. For the most part these were rate/term re-fi's, many of which were 15 year amortizations aimed at securing a low monthly payment, not extending the maturity. Net equity withdrawal has been heavily negative over the past 7 years.

Originally Posted by The_Bishop

It is a simple mathematical fact that that markets for houses purchased with a home mortgage interest deduction in effect would simply crumble in the relative absence of buyers that would result in the event of ending the deduction.

I dunno. We bought our house to live in and the deduction is rather insignificant on a $600K house that isn't leveraged to the hilt. We spend more in an average month on maintenance, repairs and upgrades than we net yearly from the tax deduction. It's quite tiny. If I banked the tax savings for 2 years, I'd have just enough to put the lease down payment on a brand new Toyota Corolla LE, paid for with the tax savings over the next 3 years.

So yeah, without the interest deduction I'd have to give up my dreams of luxuriously cruising around in a brand new Corolla. The horror!