Why are interest rates so low?

[Snobdds]

It is true for the middle class, most of us non business owners lost deductions and got a crappy standard deduction that didn’t make up for the lost deductions. There were some other benefits for those in the low income category.

They doubled the standard deduction to prevent itemizing all the questionable write-offs.

In 2025 when the 2018 tax bill sunsets...I bet your taxes go up. Lets revisit this then...so I can say, I told you so.

 

[Torvy]

Another reason your taxes may have gone up is if you live in a state with high taxes, you can only deduct up to 10k (iirc). States have been effectively shifting tax burden to the national government through these deductions. It would be better if no state taxes could be deducted on federal. Why? It masks your taxes. If you want lower taxes, you can approach your state reps to lower state taxes.

 

[MossRoad]

It is true for the middle class, most of us non business owners lost deductions and got a crappy standard deduction that didn’t make up for the lost deductions. There were some other benefits for those in the low income category.

The standard deduction was $12,550 for singles or married filing separate, $18,800 for single head of household, and a whopping $25,100 for married filing jointly.

My wife and I itemize every year since 1985, and we have NEVER beaten the standard deduction.

Yes, this year was the first in a long time that we actually had to pay, but that's what I want. I want my money up front where I can use it immediately and don't want to wait to file my taxes to get it back. It's ours!

 

[ultrarunner]

Low may be relative in that mortgage rates have definite increased…

 

[jyoutz]

The standard deduction was $12,550 for singles or married filing separate, $18,800 for single head of household, and a whopping $25,100 for married filing jointly.

My wife and I itemize every year since 1985, and we have NEVER beaten the standard deduction.

Yes, this year was the first in a long time that we actually had to pay, but that's what I want. I want my money up front where I can use it immediately and don't want to wait to file my taxes to get it back. It's ours!

They took away the 2nd mortgage interest deductions. That destroyed our tax situation.

 

[jyoutz]

They doubled the standard deduction to prevent itemizing all the questionable write-offs.

In 2025 when the 2018 tax bill sunsets...I bet your taxes go up. Lets revisit this then...so I can say, I told you so.

They took away the 2nd mortgage interest deductions, which the increased standard deduction didn’t make up for.

 

[Torvy]

They took away the 2nd mortgage interest deductions, which the increased standard deduction didn’t make up for.

Which is only fair. The whole point of mortgage interest deductions is to help people afford their 1st home. Most people who have 2nd mortgages are spending it on other stuff (or using the lower rates on mortgage loans to offset other spending).

You must have a huge mortgage or tremendously bad credit to have that deduction make that much difference. Must be nice to be a rich government employee.

 

[Raul-02]

Putting $20,000 into CDs now means they will be worth less than $10,000 in 5 years after inflation.

CDs are no longer a worthy investment strategy.
Expensive fine art appreciates at many times the rate of the stock market.
Equities are still the best and most consistent game. Get with a good house like Janny Montgomery Scott,
A good mutual fund can be a smart place to park money. Back when I was paying attention, Vanguard was the only one that was truly mutual.
I don't trust the big names like Schwab Fidelity etc.. If they are running TV ads I won't touch 'em.
I tried to invest on my own, That was dumb.
CDs are so three decades ago.

 

[jyoutz]

Which is only fair. The whole point of mortgage interest deductions is to help people afford their 1st home. Most people who have 2nd mortgages are spending it on other stuff (or using the lower rates on mortgage loans to offset other spending).

You must have a huge mortgage or tremendously bad credit to have that deduction make that much difference. Must be nice to be a rich government employee.

I used the second for remodeling our house. I did it because it was the best financial option when the housing values tanked in 2008, and all mortgage interest on a primary residence has always been deductible until 2018 tax bill changed the game. Refinancing isn’t cheap either. We are middle class, with two incomes, and that’s a cheap dig about my employer. As an economist you know that public service jobs pay less than the private sector.

 

[MossRoad]

They took away the 2nd mortgage interest deductions. That destroyed our tax situation.

I wouldn't know about that. Even when we had a mortgage, we never beat the standard deduction. We are in a fortunate situation.

 

[Torvy]

I used the second for remodeling our house. I did it because it was the best financial option when the housing values tanked in 2008, and all mortgage interest on a primary residence has always been deductible until 2018 tax bill changed the game. Refinancing isn’t cheap either. We are middle class, with two incomes, and that’s a cheap dig about my employer. As an economist you know that public service jobs pay less than the private sector.

It was a joke, hence the smiley face. I am a public school teacher (government employee). My dad is retired USAF as is my brother...government employees. My sister is a librarian...government employee....married to an economist for the state of OR...government employee. Only the elected and those close to them get rich in public service.

That aside, the intent of the original laws about mortgage interest was for home purchases. 2nd mortgages for remodels, or anything else, was a loophole that has been exploited for years. Perfectly legal, yes, but not because it was the stated purpose. Just one of many failures of omission by poor excuses for legislators (regardless of political leanings).

 

[jyoutz]

It was a joke, hence the smiley face. I am a public school teacher (government employee). My dad is retired USAF as is my brother...government employees. My sister is a librarian...government employee....married to an economist for the state of OR...government employee. Only the elected and those close to them get rich in public service.

That aside, the intent of the original laws about mortgage interest was for home purchases. 2nd mortgages for remodels, or anything else, was a loophole that has been exploited for years. Perfectly legal, yes, but not because it was the stated purpose. Just one of many failures of omission by poor excuses for legislators (regardless of political leanings).

 

[ultrarunner]

Im in a situation over interest rates... bought my home as-is with large down payment and seller financing...

Last year I mentioned I was going to refinance which would have saved me 9k over the remaining loan term when all said and done.

The seller depended on the income so I said ok let's just keep things the way they are.

Last week the seller's executor called saying they need the loan paid to settle the estate this year.

There is no provision for this but I said I would check what's available.

In the course of a year the 9k refi savings would now COST me 9k over the remaining loan term.

I forwarded the numbers tonight.

Since day one the loan has been in the sellers bank account prior to the first of each month so no issues that way.

I want to be accommodating but not to the tune of 9k.

Just a small example of interest rate fluctuation...

Maybe the executor comes back with an offset to expedite?

 

[CalG]

I'm sure this has been covered,

But interest rates are low because the world of finance is in a world of hurt, (bordering collapse) and inflation is the only way out for those bass hats that got us here.

Screw us, they have to win.

Print more fiat bills! They will always have too much, we will always provide their excesses.

 

[fatjay]

i refinanced my home last june at 2.25%. Today it's above 6%. The fed is raising hte rates, free money is ending. It will cause a housing crash in the next 2 years.

 

[Hay Dude]

Being self employed also means doing a lot of record keeping at night after an employed person comes home from work and spends their personal time doing whatever they want. I do ~2 hours of paperwork on average per night while the employed person gets to relax, go to the gym, spend time with spouse/kids, etc.

 

[Hay Dude]

I used the second for remodeling our house. I did it because it was the best financial option when the housing values tanked in 2008, and all mortgage interest on a primary residence has always been deductible until 2018 tax bill changed the game. Refinancing isn’t cheap either. We are middle class, with two incomes, and that’s a cheap dig about my employer. As an economist you know that public service jobs pay less than the private sector.

Pay less? Thats highly debatable.
Pension? UH HUH….

 

[MossRoad]

Being self employed also means doing a lot of record keeping at night after an employed person comes home from work and spends their personal time doing whatever they want. I do ~2 hours of paperwork on average per night while the employed person gets to relax, go to the gym, spend time with spouse/kids, etc.

But do you love it, or do you hate it? Do you see it as a burden or a blessing? Does your family suffer or thrive?

If you love it, and it's a blessing, and your family is thriving, then stay at it.
If you hate it, and it's a burden, and your family is not thriving, there's alternatives.

Is it worth it or not? Only you can make those choices.

 

[MossRoad]

The 6 years my wife and I were dating and the 7 we were married before we had children, we both worked multiple jobs to get debt free fast (our home loan was 12.5% in 1985). She always had two jobs and I usually had 3 while both of us were also going to college.

A full time job, two part time jobs, going to college full time, and dating/marrying someone didn't leave too many hours in the day for either of us. But that was our plan to be able to afford a family.

It paid off. Now we work 9 hour days and enjoy the fruits of our labors. We spend evenings cooking, walking, working around the house, visiting friends and family, doing our hobbies, etc. and our work doesn't follow us home.

We are fortunate, and for that we are grateful.

 

[MossRoad]

Im in a situation over interest rates... bought my home as-is with large down payment and seller financing...

Last year I mentioned I was going to refinance which would have saved me 9k over the remaining loan term when all said and done.

The seller depended on the income so I said ok let's just keep things the way they are.

Last week the seller's executor called saying they need the loan paid to settle the estate this year.

There is no provision for this but I said I would check what's available.

In the course of a year the 9k refi savings would now COST me 9k over the remaining loan term.

I forwarded the numbers tonight.

Since day one the loan has been in the sellers bank account prior to the first of each month so no issues that way.

I want to be accommodating but not to the tune of 9k.

Just a small example of interest rate fluctuation...

Maybe the executor comes back with an offset to expedite?

Yikes. You have to be able to just make a business decision and do what's best for you. Unless it's a personal friend that you would like to do a $9K favor for, I'd say no.

There was a time when I wanted to run a gas line down the road to our remote property in preparations to build a house. It would have been $8K. The gas company said to ask the neighbors across the street if they wanted to pitch in to split it 4 ways. If they didn't, they could tap into it after 3 years without paying any of the $8K run fees. So I asked them. They all said no. Things changed, we had kids, we decided not to build, so we didn't run the gas line.

Many years later, all 3 of them asked me to pitch in to have a gas line run. It was now considerably more than the $8k. I had no reason to need gas, so I declined, knowing that if we ever built in the future, we'd just have to pay the tap-in fee. One of them got quite upset at us. I reminded them that I offered them the same opportunity years earlier and they declined, and that it was bad business for them back then and it's bad business for us today. They got over it.