Strategic Realty

solutions for real estate

  • Buy
    • Search Real Estate
    • New Homes For Sale
    • Popular Communities
    • Golf Courses
      • Tetherow
      • Pronghorn
      • Lost Tracks
      • Brasada Ranch
      • Meadows
      • Woodlands
      • Crosswater
      • Awbrey Glen
      • Widgi Creek
      • Rivers Edge
      • Caldera Springs
    • Property Taxes for Deschutes County
    • Bank-Owned Properties in Central Oregon
    • Relocation to Bend
  • Sell
    • Quick Property Valuation
    • Short Sale FAQs
  • Read
  • About
    • Kerry O’Neal, Principal Broker
    • Catherine Emert, Principal Broker
    • Martha Hendrick, Principal Broker
    • Michele Dearden, Principal Broker
    • Andrew Smith, Broker
    • Rachael Osuna, Broker
    • Contact
You are here: Home / Blog Posts / What First-time Homebuyers Need to Understand about Mortgage Interest Deductions

What First-time Homebuyers Need to Understand about Mortgage Interest Deductions

By Kerry ONeal

Purchasing a home is a significant milestone in many people’s lives. It’s a momentous decision that requires careful planning and consideration, especially when it comes to financing. One of the key considerations for first-time homebuyers is the mortgage interest deduction. For many first-time homebuyers, the idea of purchasing a home can seem overwhelming and unaffordable. However, the mortgage interest deduction can make homeownership more affordable than it might first seem. In this article, we’ll explore what first-time homebuyers should understand about the mortgage interest deduction and how it can make homeownership more affordable.

The mortgage interest deduction has a long history in the United States. It was first introduced in 1913 as part of the federal income tax. Initially, all interest payments were deductible, including credit card interest and other consumer debt. However, over time, the deduction was limited to mortgage interest, and today, it remains one of the most significant tax benefits for homeowners.

In Oregon, the mortgage interest deduction follows federal guidelines. Homeowners can deduct the interest paid on a mortgage up to a maximum of $750,000 for mortgages taken out after December 15, 2017. For mortgages taken out before this date, the limit is $1 million. The deduction is only available if homeowners choose to itemize their deductions instead of taking the standard deduction.

To illustrate how the mortgage interest deduction works, let’s look at an example. Suppose someone is buying a $450,000 house with an FHA loan at a 3.5% downpayment and a 7% interest rate. With this loan, their monthly mortgage payment would be $2,768, and the total interest paid over the life of the loan would be $366,028.

If the buyer chooses to itemize their deductions and take advantage of the mortgage interest deduction, they can deduct the interest paid on the loan from their taxable income. In this case, the total interest paid in the first year would reduce their taxable income by $25,621. Assuming a federal tax bracket of 22% and an Oregon state income tax rate of 9%, this deduction would result in an annual tax savings of $5,801. Over the life of the loan, the deduction would result in a total tax savings of about $60,000.

The tax savings provided by the mortgage interest deduction can make homeownership more affordable than it might first seem. In the example above, the tax savings would amount to $483 per month over the life of the loan. This can make a significant difference in the affordability of monthly mortgage payments.

It’s important to note that while the mortgage interest deduction can be a significant benefit for homeowners, tax laws and regulations are subject to change, and the specifics of how the deduction applies to each individual can vary. As a real estate broker, I always recommend that our clients consult with a qualified tax expert for guidance on their specific tax situation.

Share this:

  • Facebook
  • LinkedIn
  • Twitter
  • Email
  • Print

Filed Under: Blog Posts

The Latest

What First-time Homebuyers Need to Understand about Mortgage Interest Deductions

Purchasing a home is a significant milestone in many … [Read More...]

Real Estate Broker vs REALTOR®

When it comes to buying or selling a property, many people … [Read More...]

Single Family Home Prices in Bend: A Casual Review

The Bend Bulletin recently published an article talking … [Read More...]

Our Fans

He has earned our highest recommendation. - Gary and Alice

Popular Communities

  • Northwest Crossing Homes
  • Tetherow Lots and Homes
  • Sunriver Resort Homes
  • Pronghorn Lots and Homes
  • Caldera Springs Lots and Homes
  • Broken Top Homes for Sale
  • Awbrey Butte Homes
  • Awbrey Glen Homes
  • Brasada Ranch Homes
  • Crosswater Homes
  • Eagle Crest Homes for Sale
  • Eagle Crest Resort
  • Ranch at the Canyons Homes
  • The Highlands Homes and Lots
  • Vandevert Ranch Homes

let us help

No matter what you’re trying to accomplish with real estate, we’re here to help. Let’s start with a real estate conversation. Let us know how I can help.

We help you find your dream home

Office Location

We're conveniently located near the center of Bend, Oregon, in downtown. Stop by our full service brokerage and let us help take some of the mystery about of the buying and selling process.

New Office Location
325 NW Vermont St., #107
Bend, OR 97703

See Location

Follow Us

  • Facebook
  • Instagram
  • LinkedIn
  • YouTube

Copyright © 2023

Strategic Realty, LLC – (541) 595-8444

A full-service real estate brokerage licensed in the State of Oregon.