Seeing how the government got us into this, let’s note that they are willing to carry some of the burden of higher mortgage rates. At today’s rates, buyers can write off twice as much mortgage interest!

Signed in 2017, the Tax Cuts and Jobs Act (TCJA) changed individual income tax by lowering the mortgage deduction limit to loans of $750,000 and under.

Let’s compare the amount of interest that is deductible in the first year:

$750,000 @ 3% = $22,285.85

$750,000 @ 6% = $44,749.47

The 30-year fixed-rate mortgage payment for $750,000 @ 6% is $4,496.63.  To qualify, a buyer would have to earn approximately $200,000 per year, which would put them in the 32% tax bracket.

It means today’s buyer would pay about $7,188 less in federal tax in the first year, or ~$600 per month.

The difference between the 3% and 6% mortgage payments is $1,334 per month. With the additional $600 per month in tax savings, it means Uncle Sam picks up about 45% of the difference!

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