What are statements that make more sense now that we pay a mortgage?

Prior to going through the home buying process, there were a lot of statements I couldn’t really comment on because I didn’t know what they were talking about. The reality is, its hard to argue when you don’t have experience. So, today I thought I would share a couple things people have said about home mortgages and whether I have found it to be true in our experience so far.

“Home mortgage interest is deductible!”

– To break this down, people are saying if you have a $2,100 mortgage, and $1,130 of that is interest (which is the case for us), then hypothetically when you are filing taxes you could deduct $13,560 in interest for the year.

* This statement is incorrect in residency.

This is going to sound complicated but its not. When you file taxes, there are two ways to make deductions: standard deduction vs itemized deduction. Essentially, the difference is if you have LESS tax deductions then $12,200 for single or married filing separately or $24,800 for married filing jointly, then you take the STANDARD deduction. Because $13,560 is pretty much our only deduction in residency, we take the standard deduction and it does not make a difference for us on our taxes. Maybe as an attending you have more deductions, but we aren’t there yet.

“You’re paying toward mortgage rather than throwing away money renting”

– A mortgage is a loan the home buyer pledges to pay back. The difference between renting and paying mortgage is, with a mortgage, each part of your monthly payment goes toward paying down the loan principle on your house. This helps build “equity” or a type of good asset. What I found surprising was how little of our mortgage goes toward our principle each month (only ~$450 monthly). That is why a “30-year mortgage” takes 30 years to pay. Sounds intuitive, but here we are.

If you found this post interesting and would like more about what we learned, comment below!

What are confusing things you have heard about buying a home?