Will the Fiscal Cliff End the Mortgage Interest Deduction? One of the items in the tax code up for alteration in attempts to avoid falling off the fiscal cliff is the mortgage interest deduction. The mortgage interest deduction gives a homeowner the ability to write down the interest they pay on their owner occupied mortgage against their active income in order to decrease the taxes they pay.
If the Mortgage Interest Deduction changes, is it still worth buying my first home? The suggested changes to the mortgage interest deduction are not to take them away completely, but rather limit them. Such as lowering the allowable deductable mortgage amount from $1,000,000 down to $500,000. So unless you’re a first time home buyer with the ability to take on a $500,000 mortgage, this change WOULD NOT affect you.
But I’ve heard that they may TAKE AWAY the ability to write off mortgage interest at all on some homes? This is true. The suggestion is to remove the ability to deduct the mortgage interest on SECOND AND VACATION HOMES, but not primary residences. So again, this doesn’t stand to affect first time home buyers.
So how does this affect me? The suggested changes affect the first time home buyer demographic in the sense that not everyone understands the proposed changes. So even though they don’t stand to be affected, many first time home buyers are waiting to buy until the final decision is made. This in turn could be cooling down the market in your area. If this is the case, it could actually HELP YOU get a better deal, as your competition is temporarily reduced.
How can I get more information about the First Time Home Buyer process? Don’t make a final decision without collecting more information first. If you’d like to get educated about down payment assistance progams in Washington State, or about the first time home buyer process in general, go to our Calendar/Reservations page and sign up for one of our FREE workshops.