My MID-life Crisis
By Homer Guthrie
My wife and I had just settled down in front of the TV the other night when the saddest advertisement came on. A grandpa was sitting with his grandson on the steps of their home, talking about how he hoped homeownership would still be around when the little kid grew up. I thought I could see a tear in the old guy’s eye. I was so upset that it ruined the whole first half of Dancing With the Stars for me.
Who in his right mind would want to get rid of homeownership? It’s as much a part of the American Way of Life as consumer debt, outlet malls and cell phones. So I asked Ernest S. Crowe, my mortgage guy, and Bea Meriwether, my real estate agent, over coffee the next morning.
“Oh, Homer. It’s just code,” said Bea.
Now I was really confused. “Code like spies use?”
“No, silly. When real estate people say they want to preserve homeownership what they really mean is they want to preserve the mortgage interest deduction. ‘Homeownership’ is code talk for the MID”.
Now the mortgage interest deduction is something I know all about since I’m an expert homeowner, but when Felicity and I bought our first house 20 years ago, we had never heard of it. On the day we put a contract on a house we went out to dinner with my parents and my father gave me a little knowing wink, the kind of guy-to-guy wink that usually refers to something mysteriously naughty.
“And just think of the tax benefits,” he whispered. Tax benefits? That didn’t sound naughty to me at all.
Our agent explained the mortgage interest deduction to me and I was right. It wasn’t naughty. It wasn’t even very interesting. Until April 15th came around the next spring. When we got more money back from the IRS than ever before, the MID got my attention, yes sir. “You see, the mortgage interest deduction is the way Uncle Sam thanks homeowners for helping to keep our nation great,” explained our agent.
As the years passed, however, our mortgage interest deduction got smaller and smaller every year. It felt like maybe we did something to tick off Uncle Sam or maybe he was just feeling a little less grateful. But it was really because the interest on mortgages is front loaded. You pay more at the outset and less at the end, which was really a problem since as we grew older we really needed it.
Now I understood why the old guy in the ad was crying. Maybe he was losing his mortgage interest deduction too.
“So who would want to take away somebody’s mortgage interest deduction?” I asked. “It’s bad enough that so many old people slowly lose theirs if they pay their mortgage on time every month the way that they are supposed to.” One reason that I’m an expert homeowner is that I know that exact hour of the exact day every month that is the latest I can send in my mortgage payment without getting my credit dinged.
Ernest leaned over his coffee and spoke so that just the two of us could hear. “Renters,” he whispered.
Bea chimed in. “They’re not doing anything to build the American economy except throwing away their money on rent, but they’re jealous of homeowners.”
“Very shortsighted. If everyone rented, rents would go through the roof and where would those renters be then?” asked Ernest.
“Instead of taking it away, what they really should be doing is helping older homeowners who lost their mortgage interest deduction,” I offered. “I mean, after all, its older folks like us who paid our mortgages on time for all those years.”
“Oh, there’s an easy answer to that,” said Bea.
“I should say,” agreed Ernest.
“Just sell your house, buy a new one and take out a new mortgage. A retirement cottage on the shore, perhaps, or a high rise condo in the city,” said Bea.
“I have a better idea. Just refinance. You can get super low rates today and take a bunch of money out of your equity. Take a cruise or tour Europe. Enjoy life,” said Ernest.
“Buy and sell,” growled Bea.
“Refi!” countered Ernest.
They both sounded like great ideas to me. Someone should clue in that poor old grandpa on the TV ad.
Read House Poor Every Week in Real Estate Economy Watch.
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