(04-25-2012, 01:23 PM)kandrathe Wrote: The main program that our government has to promote home ownership is that we are able to deduct a portion of our mortgage interest from our gross income when calculating taxes.
Hi Kandrathe,
yes that is how it is in the Netherlands as well. But as opposed to crusader I am 100 % against this thing. I also have a house and profit from this rule but it gives a completely wrong incentive to people.
A few years ago I just thought it was a good idea to quite the mortgage interest deduction because it favours people that buy very expensive houses (we don't call it villa-subsidy for nothing). So if you buy a house of a million euros with an 1M euro mortgage you might get back (say there is a 5% interest rate) 25000 euro per year if you have a high salary.....and this is not what this law was meant for.
Now since the crisis (1st) I am all in favour of completely abolishing the law, because it tells people it is good to loan money, and we have seen that that is not a good thing. Of course this measure has to be cancelled very slowly (a few% or with decreasing maximum at a time) because if you do this all at once it will damage the housing market and economy. A smart person should make sure he can pay for his mortgage even if the deduction is stopped or even if for example interest rate go up 4 %, because if you can't you are just too vunerable.
Of course as crusader says it will cost you, but house prices will start being more normal.