Re: AKICIF: "X-Kaspersky:" header

In article <dcmdnZEL7NBsy23anZ2dnUVZ_sKqnZ2d@[EMAIL PROTECTED]
>,
 Doug Wickstrom <nimshubur@[EMAIL PROTECTED]
> wrote:

> On 30 Mar 2008 12:22:51 -0400, "Keith F. Lynch"
> <kfl@[EMAIL PROTECTED]
> wrote:

....
> >Good point.  But I'm pretty sure that in the US, due to the tax code,
> >it seldom makes sense to pay down one's mortgage in less than 30
> >years.  Anyhow, it doesn't address whether it's *rare* to never borrow
> >money, since it doesn't apply at all to someone who rents rather than
> >buys a home.
> 
> Like many of the things you are sure about and of which you have
> no personal experience, you are again mistaken.  It _always_
> makes economic sense to pay down a mortgage as quickly as
> possible.  Mortgage interest isn't deducted from taxes owed, but
> from gross income.  There are some unusual circumstances that
> dictate borrowing against a dwelling in order to make other
> purchases deductible, but in and of itself, the faster a mortgage
> is paid, the less it costs.

Nonsense.

You are making the mistake, I think, of calculating as if what mattered 
was the sum of dollars paid, ignoring when they are paid. A dollar paid 
today is not the same cost to you as a dollar paid in ten years.

Mortgage interest is deducted from taxable income. Suppose you borrow 
$100,000 at 4%, and suppose your marginal tax rate is 50%--since you 
made an "always" claim, I think I'm entitled to pick my numbers. Further 
suppose that you can invest in stock and get an average return of 4% in 
the form of appreciation--capital gains not dividends. 

You are paying $4000 but saving $2000 in taxes, so the real cost to you 
is $2000/year. You are getting $4000 in interest, but since it's capital 
gains it gets taxed at less than your marginal rate, so you have more 
than $2000 left after taxes.

-- 
 http://www.daviddfriedman.com/
http://daviddfriedman.blogspot.com/
 Author of _Harald_, a fantasy without magic.
 Published by Baen, in bookstores now