Everyone loves to talk about the deductibility of mortgage interest, and then take their tax rate out of the interest rate. (ie: "My mortgage is 4%, but really only 3% after taxes!")

Am I missing something, or is this wrong UNLESS your mortgage interest paid is completely above and beyond what the standard deduction would be?

Put another way: If I fill out out my taxes and DON'T itemize, a married couple's standard deduction is $11,900. If I itemize, and with my mortgage interest the deductible amount is 12,500, haven't I only saved my marginal tax rate on $600 over what I would've paid if I had no mortgage? And if that's the case, shouldn't we be looking at what we ACTUALLY save on mortgage interest OVER the standard deduction before we start quoting our "after tax" mortgage rates?