HOW TO CALCULATE THE AFTER-TAX COST OF YOUR MORTGAGE 

January 15, 2024 | Kevin Brierton Team | , ,

Kevin Brierton – 1.15.2024

YOUR COST OF BORROWING MAY BE LOWER THAN YOU THINK

Homeowners who itemize tax deductions can deduct the interest on up to $750,000 of mortgage balances used to buy, build, or improve a qualified home. Here’s how to figure out the impact of that tax deduction:

WHAT IS YOUR MARGINAL TAX BRACKET?

In our example, we’re going to use a tax bracket of 24%.

WHAT IS YOUR MORTGAGE RATE?

In our example, we’re going to use a mortgage rate of 7%.

WHAT IS YOUR AFTER-TAX INTEREST RATE?

  • Step 1: Express your tax bracket as a decimal: 24% = 0.24
  • Step 2: Subtract that number from the whole number one: 1 – 0.24 = 0.76
  • Step 3: Multiply that number by your interest rate: 7% x 0.76 = 5.32%

In this example, a 7% mortgage costs 5.32% after-tax for someone in a 24% tax bracket.

PLEASE NOTE: THIS ARTICLE IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 936. Also, this article is not an offer or commitment to lend you money, and it is not an advertisement for a specific mortgage or a specific interest rate.

NOTE: this only applies if you itemize your tax deductions. Generally, you’ll only itemize if your total itemized deductions exceed the standard deductions listed below (for 2024):

$29,200 for married taxpayers filing a joint return.
$14,600 for single taxpayers.Source: Momentifi

Contact me for more info

Kevin Brierton
Branch Manager
NMLS: 599873
NEO Home Loans
Corporate NMLS: 150953
[email protected]
https://www.kevinbrierton.com
4805538770
6991 East Camelback Rd., Ste D-300 Scottsdale, AZ 85251

NEO Home Loans is a registered DBA of Luminate Home Loans, Inc. NMLS# 150953. Corporate Headquarters 2523 S. Wayzata Blvd, Suite 200, Minneapolis, MN 55405. This advertisement does not constitute a loan approval or loan commitment. Loan Approval and/or loan commitment is subject to final underwriting review and approval.