Not only are mortgages tax deductible (check out my previous post, Reason #4--Mortgages interest is tax deductible), they are also tax favorable.  What does this mean for you?

Consider two scenarios.  You have a mortgage that costs 6% in interest and you have also earned 6% on your invests over the course of one year.  The mortgage interest is deductible at all levels of income tax brackets.  The money you have earned in interest on your investments is taxed as low as 15% (depends on several factors).

So, your mortgage will actually only cost you 4.5% after taxes, while your investments will net you a 5.1% return after taxes are deducted. In other words, the government has structured tax law so that it is beneficial for you to maintain your mortgage and therefore it is tax favorable to carry a mortgage.

Just imagine the possibilities if you were able to decrease your interest rate on your mortgage, thus reducing your monthly expenses, and increase your rate of return on investments!  I know several people in the same situation and even in this market, they are doing just fine!

Check out my outside blog, Mortgage Wealth.