Home Owners > Mortgages and Insurance

US homeowners get tax relief of mortgage interest

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Denny Crane:
In the US interest on a mortgage is fully tax deductible!
This represents a $100 million mortgage tax relief giving US homeowners every incentive to borrow as much as they can.

A little known cause of the 2008 financial crisis was the fact that the majority of toxic mortgages were not given to expand home ownership.
They were for re financing existing home loans marketed as a tax efficient way of getting cash from your home.
So while interest charged on a home loan is tax deductible, interest charged on credit cards or a personal bank loan is not.
When an overheated property market caused house prices to surge, people used the equity in their US homes as a tax free credit card. 
With the Fed also keeping interest rates artificially low, it is no wonder the party had to end badly.

The Prophet:
In the UK we used to have MIRAS  (Mortgages Interest Relief At Source) similar to the current US scheme.
This was a scheme introduced in the UK by Roy Jenkins in 1969 in a bid to encourage home ownership; it allowed borrowers tax relief for interest payments on their mortgage.

MIRAS was completely abolished in April 2000 by then Chancellor of the Exchequer and former Prime Minister Gordon Brown.
He argued it had become a "middle class perk."  
Even Prince Charles had campaigned for the abolition of MIRAS

With house prices slumping and the British economy in recession there are calls for it to be reintroduced.  
However, mortgage rates are historically low, effectively giving the same benefit MIRAS gave borrowers when interest rates were around 8-10%.

New Home Expert:
Now the "upper class perk" that is the unfair and an unjust Mortgage Interest Tax Relief for Buy-to Let landlords is being abolished, albeit very slowly

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