Mortgage interest rate deduction benefits

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Topic Author
FOG
Posts: 6
Joined: Fri Aug 09, 2013 9:52 pm

Mortgage interest rate deduction benefits

Post by FOG » Thu Nov 14, 2019 5:31 pm

Bogleheads,

I'm weighing the pros and cons of being invested (having a mortgage) in a property in Fairfax, VA. I just retired from the military and make about $275K a year before taxes. I'm 100% disabled which means I don't have to pay Virginia property taxes. Here is my dillema: i'm 58 and plan to work for another 5 to 7 years. I'm able to save/invest about $5K a month and have healthy savings/401K/Roth IRA accounts. I'm staying in the DC area becasue of the job market, pay, and proximity to my son who also lives/works here. My rent is currently $3K a month and anything I would buy would put me in the range of $4K a month for a mortgage. Knowing that I do not want my forever home to be here, in Northern VA, should I wait and continue to save/invest? Or is the benefit of having a mortgage and owning property worth the risk knowing I'm only here for another 7 years max?

Thank you in advance for your input . . . . .

bloom2708
Posts: 6968
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Mortgage interest rate deduction benefits

Post by bloom2708 » Thu Nov 14, 2019 7:03 pm

Easy rent scenario.

$12k standard deduction for all. Interest deduction is only above the standard deduction.

If your mortgage was less than rent it might be worth it. 5-7 years is short to recover fees.

Thank you for your service. Keep renting.
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words. Whole food, plant based. Bing it.

Topic Author
FOG
Posts: 6
Joined: Fri Aug 09, 2013 9:52 pm

Re: Mortgage interest rate deduction benefits

Post by FOG » Sat Nov 16, 2019 9:04 am

Thank you !

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grabiner
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Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Mortgage interest rate deduction benefits

Post by grabiner » Sat Nov 16, 2019 11:12 am

bloom2708 wrote:
Thu Nov 14, 2019 7:03 pm
$12k standard deduction for all. Interest deduction is only above the standard deduction.
But if you are single and donate to charity, you may deduct all your mortgage interest. Given your income, you are paying more than $10,000 in VA state income tax. Thus it would take only $2400 in charity for you to itemize even without the mortgage. Your mortgage interest would be deductible at 32% or 35% federal, and 5.75% VA tax.

If you do buy a home with a mortgage, take either a 15-year mortgage or a 7-year ARM for the lower rates. The main benefit of a 30-year fixed-rate mortgage is that you lock in a rate for 30 years, but you don't get that benefit if you expect to leave in 7 years, so there is no reason to pay a higher interest rate.
Wiki David Grabiner

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