Mortgage Interest

  

Categories: Mortgage

See: Mortgage. See: Mortgage Rate. See: Adjustable-Rate Mortgage (ARM).

What's the magic sauce in a mortgage? Rhymes with "shmax shmeductibility."

Yep, the interest comes right off the top. So if you have an interest-only mortgage of $300,000 and you're paying 5% interest, then you're paying $15,000 a year in fully deductible interest.

You make $100,000 as a forensic dentist, and on your last $30,000 in earnings, you pay 30% tax. But now, as far as the tax collector cares, you don't make $100,000. You make $85,000, because that $15,000 in interest comes right off of your taxable earnings. So whereas normally from $70,001 to $100,000, you'd pay 30% of that $30,000, or $9,000 in taxes, now, you pay 30% on the $15,000, from $70,001 to $85,000, or $4,500.

You save $4,500 in taxes. Or, said another way, instead of it feeling like $15,000 in mortgage interest, it feels more like $10,500 in mortgage interest costs.

Welcome to the American Dream. Pay at the window on the right.

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Finance: What is a second mortgage?4 Views

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Finance allah shmoop What is a second mortgage Okay you

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know what a first mortgages it's otherwise cleverly named what

00:12

is called it is called oh yeah Mortgage it's Just

00:14

a loan on a house You paid four hundred grand

00:17

for this baby Hundred grand down two hundred fifty grand

00:19

in a first mortgage And they're still fifty grand You

00:23

owe well where's that fifty large coming from the bank

00:27

wouldn't loan you any more on a first mortgage that

00:30

was costing you six percent a year Tio you know

00:32

to rent that money So you had to get a

00:34

second mortgage which should things go awry and you become

00:40

a statistic Well that's it's fully behind the first mortgage

00:44

in the priority stack of payback So in a bankruptcy

00:48

situation the first mortgage first what's called a first mortgage

00:52

get it fully paid along with any fees associated with

00:55

it and back interest accrued and any other things that

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are associated with that first mortgage it stands in line

01:02

first in priority Then any cash leftover gets attributed to

01:07

that second mortgage So not surprisingly second mortgage money costs

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a lot more to rent then first mortgage money because

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the risk of non payment in a bad situation is

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meaningful E higher especially when the borrowed does this for 00:01:25.136 --> [endTime] a living

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