Author Topic: But I need my mortgage deduction!  (Read 5960 times)

CommonCents

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But I need my mortgage deduction!
« on: November 25, 2013, 09:45:47 AM »
Lunch with my father-in-law:

He mentions he has a mortgage on his current home at 5.375.  (His second home, which he bought this summer intending to move there when he retires to the Cape in 3 years is 3.5% at least, if you gloss over the fact that he is paying for 3 years of a house he's not using and not renting out.  Or giving us keys to vacation there.)  He's almost 70, so I'm not even sure why he has a mortgage still.
Me: Have you thought about refinancing?
Him: Refinancing costs money
Me: Talk to a mortgage broker.  We have friends that gave up a little on the interest rate in exchange for the lender paying the fees.  You might also do one with an arm, if you are planning on selling the house in a few years.
Him: But I need the mortgage deduction. 
:facepalm:

Husband & I cringe.  I give up.  He gamely soldiers on.
DH: You know dad, that you are paying money to get the mortgage deduction.  It's better not to pay the money at all, than to get a deduction on part of it.
FIL changes subject.

We tried to talk him into refinancing about 2? years ago when he wondered if he should consider it.

Angelfishtitan

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Re: But I need my mortgage deduction!
« Reply #1 on: November 25, 2013, 09:58:51 AM »
Fukkin taxes, how do they work?

^That is one of the biggest commonalities I find of people, despite their backgrounds.

infogoon

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Re: But I need my mortgage deduction!
« Reply #2 on: November 25, 2013, 10:48:17 AM »
I know someone who did the same thing -- got a HELOC on a paid-off house, and then used it to finance a ton of renovations.

"Well, I could have paid for it out of pocket, but this way I get to write off the interest on my taxes!"

randymarsh

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Re: But I need my mortgage deduction!
« Reply #3 on: November 25, 2013, 11:02:12 AM »
Everyone knows spending $1 to save $0.25 is a smart move!

MrsPete

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Re: But I need my mortgage deduction!
« Reply #4 on: November 25, 2013, 11:18:43 AM »
We say it in our house on a regular basis:  Somebody can't math. 

CommonCents

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Re: But I need my mortgage deduction!
« Reply #5 on: November 25, 2013, 11:21:50 AM »
The sad thing is that's he's actually a smart guy.  He's got a phd into complicated science field that I only understand on a very general level.  So I don't understand where this disconnect comes from.

Jamesqf

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Re: But I need my mortgage deduction!
« Reply #6 on: November 25, 2013, 11:23:26 AM »
"Well, I could have paid for it out of pocket, but this way I get to write off the interest on my taxes!"

Could be a smart move.  Say you're paying 3.75% on the borrowed money, and had kept the money you could have paid out-of-pocket in a good index fund instead, so you made something over 20% on it this year.

Bruised_Pepper

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Re: But I need my mortgage deduction!
« Reply #7 on: November 25, 2013, 11:26:24 AM »
The sad thing is that's he's actually a smart guy.  He's got a phd into complicated science field that I only understand on a very general level.  So I don't understand where this disconnect comes from.

Nobody wants to deal with anything financial.  I was a Finance major at my business school, and every time I was part of a team project (there were a lot), everyone else jumped for joy when they realized I was in Finance, because they didn't have to do any of the financial statements.  And these people were all business majors, obviously.  It's a field that deals with numbers constantly, and they were all scared to death of adding a dollar sign in front of any of their numbers.

CommonCents

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Re: But I need my mortgage deduction!
« Reply #8 on: November 25, 2013, 11:41:05 AM »
"Well, I could have paid for it out of pocket, but this way I get to write off the interest on my taxes!"

Could be a smart move.  Say you're paying 3.75% on the borrowed money, and had kept the money you could have paid out-of-pocket in a good index fund instead, so you made something over 20% on it this year.

Sure, but that doesn't explain why pay 5.375% in interest when you could pay 3.75-4.25%.

Bigote

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Re: But I need my mortgage deduction!
« Reply #9 on: November 25, 2013, 11:56:49 AM »
We say it in our house on a regular basis:  Somebody can't math.

Awesome, I'm so stealing that!

Jamesqf

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Re: But I need my mortgage deduction!
« Reply #10 on: November 25, 2013, 01:15:37 PM »
Sure, but that doesn't explain why pay 5.375% in interest when you could pay 3.75-4.25%.

Avoidance of hassle?  Wondering if, after you've jumped through all the mortgage company hoops, they'll actually make a loan to someone who is perhaps self-employed or retired?  I had those sorts of problems when I refinanced a couple of years ago.  I suppose I could do it again, and shave about 3/4 of a point off my current rate, but it's just not worth the aggravation.

Angelfishtitan

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Re: But I need my mortgage deduction!
« Reply #11 on: November 25, 2013, 02:16:16 PM »
Sure, but that doesn't explain why pay 5.375% in interest when you could pay 3.75-4.25%.

Avoidance of hassle?  Wondering if, after you've jumped through all the mortgage company hoops, they'll actually make a loan to someone who is perhaps self-employed or retired?  I had those sorts of problems when I refinanced a couple of years ago.  I suppose I could do it again, and shave about 3/4 of a point off my current rate, but it's just not worth the aggravation.

Then he should say it as it is, even though it is probably the reason, not dance around the question with a cliche about a tax break. The problem with "we can't assume" is the father-in-law said why, whether it is the truth is another matter but it seems silly to assume otherwise.

CommonCents

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Re: But I need my mortgage deduction!
« Reply #12 on: November 25, 2013, 02:57:33 PM »
Sure, but that doesn't explain why pay 5.375% in interest when you could pay 3.75-4.25%.

Avoidance of hassle?  Wondering if, after you've jumped through all the mortgage company hoops, they'll actually make a loan to someone who is perhaps self-employed or retired?  I had those sorts of problems when I refinanced a couple of years ago.  I suppose I could do it again, and shave about 3/4 of a point off my current rate, but it's just not worth the aggravation.

Then he should say it as it is, even though it is probably the reason, not dance around the question with a cliche about a tax break. The problem with "we can't assume" is the father-in-law said why, whether it is the truth is another matter but it seems silly to assume otherwise.

That, plus he's actually still working full-time.  Holds a endowed chair at a university, still doing research, teaching classes, etc.  His wife doesn't work so you might think she also has some time to deal with the hassle, or he could do it in his required one-month off in the summer.  (May not want to do it, but does have the opportunity.)

mbk

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Re: But I need my mortgage deduction!
« Reply #13 on: November 25, 2013, 04:05:07 PM »
That, plus he's actually still working full-time.  Holds a endowed chair at a university, still doing research, teaching classes, etc.  His wife doesn't work so you might think she also has some time to deal with the hassle, or he could do it in his required one-month off in the summer.  (May not want to do it, but does have the opportunity.)
Wow. Thats really a big position. It indicates he is very smart. Your FIL may be set in his ways.

Crash87

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Re: But I need my mortgage deduction!
« Reply #14 on: November 25, 2013, 05:17:11 PM »
I think some people just don't like to do/learn things that aren't already in their wheelhouse.

CommonCents

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Re: But I need my mortgage deduction!
« Reply #15 on: November 25, 2013, 09:33:35 PM »
That, plus he's actually still working full-time.  Holds a endowed chair at a university, still doing research, teaching classes, etc.  His wife doesn't work so you might think she also has some time to deal with the hassle, or he could do it in his required one-month off in the summer.  (May not want to do it, but does have the opportunity.)
Wow. Thats really a big position. It indicates he is very smart. Your FIL may be set in his ways.

Yes indeed. 

MrsPete

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Re: But I need my mortgage deduction!
« Reply #16 on: November 26, 2013, 10:33:56 AM »
The sad thing is that's he's actually a smart guy.  He's got a phd into complicated science field that I only understand on a very general level.  So I don't understand where this disconnect comes from.
Hey, my father was a CPA.  Clearly he understood math, numbers, money.  He was a math whiz.  Couldn't manage his own finances; but it was lack of self-discipline, not lack of understanding.   Yeah, it was a disconnect. 

MKinVA

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Re: But I need my mortgage deduction!
« Reply #17 on: November 26, 2013, 10:48:49 AM »
When it comes to your own finances, it is no longer math...it's psychology...or maybe psychiatry...

Dicey

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Re: But I need my mortgage deduction!
« Reply #18 on: November 26, 2013, 12:59:42 PM »
We say it in our house on a regular basis:  Somebody can't math.

Awesome, I'm so stealing that!

<1, =1, >1, +1...yeah, that's it, +1.

mbk

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Re: But I need my mortgage deduction!
« Reply #19 on: November 26, 2013, 11:23:59 PM »
That, plus he's actually still working full-time.  Holds a endowed chair at a university, still doing research, teaching classes, etc.  His wife doesn't work so you might think she also has some time to deal with the hassle, or he could do it in his required one-month off in the summer.  (May not want to do it, but does have the opportunity.)
Wow. Thats really a big position. It indicates he is very smart. Your FIL may be set in his ways.

Yes indeed.
IMO, many successful people are set in their ways. It minimizes the energy expended in fretting over minor details. I think It makes them very productive in their career or research. I observed that my PhD advisor with an established career does things in a very inefficient way if each of his actions were analyzed individually. But he is very productive. When doing my PhD, I was trying to use the next best optimal method or tool for each task. But now I don't spend that much time looking for new fancy things. A lot of mental energy is spent in that effort and I realized later that its better to conserve that energy and focus on research.
Endowed chair position is very hard to get. It indicates your FIL is one of the leading researchers in the world in that particular field.