Fall of the Dutch

[kandrathe]

Nit: we're allowed to deduct all of our mortgage interest along with PMI (insurance the bank has against defaults), and property taxes. Unless your interest per year is extremely low (below the personal deduction), you'll easily be able to deduct all of the mortgage interest (including PMI and property taxes) from your effective gross income (what the US government figures your taxes based on).

I seemed to recall a cap ($1M on loans) in there. Not that I'd know personally. I'm wasn't sure how they handle 2nd mortgage either (at the same rate). I think it also applies to the $1M cap. :-)

I like the cap, but the big problem with a one size fits all cap is that land value often dictates the bulk of the cost. In and around silicon valley, an unremarkable city lot with a very small single story home may fetch over $1M, where in a rural area it may constitute thousands of acres with a palatial multistory mansion, and dozens of barns and other outbuildings. In order to drive some fairness into the system these figures need to be indexed to local costs of living. But, say we did this... The expensive east and west coast areas of the US would garner even more of the Federal Home Mortgage Deduction dollars at the expense of all tax payers. So, I think it would be best if these programs were handled more at a local level where the variations in lifestyles and costs can be factored in for those that benefit and pay for them. Maybe if the Feds want to help they should focus on creating affordability by subsidizing interest rates for those people with relatively lower incomes. But again, like what has happened with our Student Loans and College costs, more subsidies can mean more demand and higher prices.

Now since the crisis (1st) I am all in favour of completely abolishing the law...

I agree. I think often people who may be better off leasing or renting are persuaded to buy a home before they are ready. People may prefer a higher density living arrangement if there were equality in how owning versus leasing were treated. I think due to the governments promotions of subsidizing home ownership it seems better to move laterally into investing into a home with the same payment amount per month, however people discount the costs of maintenance (lawns, roofs, appliances, etc.) I enjoy having my own place, but there are days when I'd prefer the upkeep to be done for me.

Also, I think if the government extracted itself from promoting home ownership, the market (both home costs and renting) would stabilize around the actual cost of that particular living arrangement.