Obtaining a Mortgage

One of the key considerations in owning real estate is obtaining a mortgage, unless you are paying cash for the property.

 A mortgage has many benefits, including tax deductibility of the interest on federal, state and local income taxes (along with other items such as real estate taxes).  There are limits on the deductibility depending on the mortgage amount, your income and other factors.  The IRS website has a detailed breakdown.

Another benefit of a mortgage is the impact of leverage.  If a home is appreciating by say the rate of inflation, such as 4%, and your equity in the home is 20%, your return on that 20% will be dramatically higher than the return would be if a purchaser had paid all cash.  Proper allocation of investment sources in retirement accounts, such as a 401k, home equity and other investments is prudent.