Why Wealthy Americans Are 25% More Likely To Hold Mortgage Debt
Interesting fact of the day, from MSN Money:
55.5% of “wealthy” Americans have mortgages on their primary homes vs. 44.6% of the overall population.
This doesn’t mean that the wealthy are more indebted than the rest of us, but it may mean that the wealthy are maximizing the tax deductions that the IRS makes available to every homeowner in the country.
Unlike every other type of consumer debt, interest paid on most home loans is tax-deductible and is deducted from the homeowner’s annual income. For this reason, a homeowner’s “bottom line” interest cost is much, much less than his note rate.
If you are in the 28% tax , for example, and your note rate is 6.00%, your “bottom line” interest rate is 4.32% after factoring in the tax deductibility of your interest payments.
Check with your CPA for exact math, of course, but you can see how mortgage debt may fit into a professionally-managed financial plan that features annual returns higher than 4.32%.
Wealthy or not, every homeowner should consider the impact of losing tax deductions before paying off their mortgage.
If the wealthy are doing it and they have a team of advisors surrounding them, maybe there’s something to it for everybody else.
Source
5 lessons the rich can teach you
Liz Pulliam Weston
MSN Money
