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Chris's avatar

The math fails to account for mortgage interest deduction on income taxes, and for increases in rent prices. Let's look at scenario 2 again. Alice, who can afford a $700k house, probably makes $100k+ per year and therefore her income is taxed by the federal government at the 24% marginal level. Her monthly payment on a 30-year loan principal of $562k at 7% is $3742. Over 18 years, she pays over $600k in mortgage interest. If this is deducted from her taxable income, she pays ~$150k less in taxes over those 18 years. This is a lot more than "a few tens of thousand dollars" over 18 years, rather it makes her save nearly $10k more per year. Her savings would increase even more if we account for higher earnings, increases in rent over 18 years, and state tax benefits.

I'd be more persuaded to read the rest of the article if the math added up, but unfortunately it's not realistic. You paint a worse picture for home ownership than it deserves.

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HumbleRando's avatar

Great post!

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