The Real Estate Bloggers

Mortgage Interest Deduction Gone For 2nd Homes and Those Over 500,000?

Posted: 10 Nov 2010 06:12 PM PST

A bipartisan fiscal commission is recommending that the mortgage interest rate deduction should be taken away from second homes and mortgages over $500,000.

I am sure a number of real estate agents in towns that have high home prices just swallowed their gum reading that statement. Those that sell in vacation destinations probably did worse. Over here in Georgia the pain of these changes will not be felt that badly, but if you are selling homes in Malibu or Wrightsville Beach, North Carolina the pain would be felt with lower demand and most likely lower property values.

Not the combination you are looking for in the worst housing marketing since the great depression.

Michael Berman, chairman of the Mortgage Bankers Association voiced concern over the plan to limit mortgage deduction to exclude second residences, home equity loans and mortgages over $500,000.

“Given the fragile state of the nation’s housing market, now is not the time to be scaling back incentives for homeownership,” he said today in a statement. “The mortgage interest deduction is one of the pillars of our national housing policy, and limiting its use will have negative repercussions for consumers and home values up and down the housing chain.”

While Berman expressed concern about the effects of the policy on the housing market, Ryan Ellis, tax policy director with Americans for Tax Reform, said the proposal would lead to a tax increase.

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Mortgage Interest Deduction Gone For 2nd Homes and Those Over 500,000?