"Qualified" for tax deductability.
Huh? A mortgage is just a loan. So why wouldn't any loan (now up to $500,000 max) be qualified as a mortgage? Like...couldn't you just borrow that dough from Rich Uncle Larry?
Well...no. In fact, mortgages carry all kinds of very specific lending language for a variety of reasons, such that in order to receive the mortgage interest credit or tax deduction by dint of paying that mortgage interest, takers of mortgages have to buy them through banks.
So...doesn't this seem like a scam? Like...the government is monopolizing the mortgage industry in forcing you, the home buyer, to essentially buy through them, or at least under their set of rubrics. Well, in fact, it's actually a pretty good idea when you think of all the things that could go wrong, were anyone able to lend anyone money for mortgages.
Those issues revolve around what happens when things go...awry. Like...it's 2009 and nephew Bobby lost his job at the enema clinic. Now he can't make his mortgage payments. And, well, Uncle Larry isn't so rich any more. He wants those payments. Needs them. So now Uncle Larry has to kick Bobby and his wife and their little enemates out of the home, with a sheriff dragging the bags and tubing behind them.
Painful social situation. Bad headlnes. Nobody wants this. So in forcing mortgages to be run through banks, there is a third neutral party doing the kicking-out if need be, and there is a higher level of scrutiny in granting mortgages in the first place. That is, banks can just say no to granting a mortgage in the first place. Supposing the buyer doesn't qualify because they dont have enough money down, or don't earn enough, or have bad credit or whatever...if the bank just says no, then the family doesn't upgrade homes...or they just keep living in the apartment or tool shed they've been living in. No sheriff involved, no tears. Well, some tears.
Related or Semi-related Video
Finance: What is a Mortgage?345 Views
Finance allah shmoop shmoop What is a mortgage Well people
a mortgage is just dead it's alone but one with
special tax treatment For most people simply put Any interest
you pay on a mortgage to buy a home is
tax deductible Morty morton's inputs down a hundred thousand bucks
to buy a home that costs four hundred big ones
his mortgages three hundred grand at five percent interest per
year So that's fifteen thousand dollars a year he pays
to rent the money from the bank which he uses
to buy his dream home with the loop de loop
waterslide Morty earns one hundred grand a year and pays
tax on his last fifteen thousand of earnings soas faras
The irs is concerned since morty can deduct his fifteen
thousand dollars in interest against his earnings he does not
in fact earn taxable wages of one hundred grand annually
Instead he earns taxable wages of eighty five thousand dollars
a year Essentially with government is doing is sharing in
some of the cost of renting the money Taub i'm
ortiz home well why would the u s government be
so charitable Well because home ownership has been integral part
of the american dream since the u s of a
i po'ed in seventeen seventy six easy access to mortgages
and then home buying can be a hugely beneficial asset
In the vast majority of cases homes create family stability
a store of wealth and tax dollars for local schools
in the form of real estate taxes So don't feel
bad about splurging on that water slide there Morty Just 00:01:42.93 --> [endTime] remember you're doing it for the kids Hello
Up Next
What are the components of a mortgage payment? Mortgage payments generally consist of (4) components acronymed as PITI: Principal, Interest, Taxes,...
What is an Adjustable-Rate Mortgage (ARM)? An adjustable-rate mortgage is a mortgage that has a changing interest rate. Whatever it changes to is b...
An interest-only mortgage is a mortgage on which you only pay the rent on money borrowed, rather than on the principal.