so... I'm really not up on all this stuff, and will probably be asking a stupid question, but ....
So if I pay 10,000 in interest to a stupid bank on a mortgage, I can deduct it, and maybe that would save me $2500? If I give $10,000 to a church, isnt it the same $2,500 I save??
Both mortgage interest and charitable contributions are itemized deductions. They will only lower your tax bill to the extent that they exceed your standard deduction:
2013 Standard deductions, for reference:
Single $6,100
Married Filing Jointly $12,200
Head of Household $8,950
Married Filing Separately $6,100
Qualifying Widow(er) $12,200
For each dollar that you increase itemized deductions over your standard deductions, you will indeed save your marginal tax rate. In your example you assume a 25% tax rate.
But really, how often do people choose between paying mortgage interest and paying charitable contributions? The decision would really only come up if you are thinking "If I pay off my mortgage early and give the amount I would be putting to interest to charity, would I be able to have the same tax bill?" This seems a little nonsensical to me.