7gcbc/Gaunty.
I like to follow the KISS principle as much as possible in my life.
To my simple mind the 'fairest' deal in borrowing money from banks would be;
1/. Reasonable deposit 10-20% and
2/. Fixed interest rate for the term of the loan.
You either can afford it or not...it's unfair to be able to afford it now but not in x years if the interest rates double but your pay has remained static in real terms for all the reasons we see daily.
Currently % rates are around 6.5% ish. That means if I borrow 250k for a house I should chuck in say 25k myself and pay off the rest at 6.5% interest...I see no reason why I should be exposed to the possibility of 10% x years down the track but accept that if people were able to borrow at 5% a few years before me good luck to them.
Thanks to compounding interest we are NOT paying 6.5% anyway...by the time you have paid off the loan, assuming you take the whole 25 yrs, you'll have paid back closer to double what the house cost to buy. Seems the banks have decided (a LONG time ago) that they should not only benefit from the straight profits from lending capital but should also take a large chunk of any future capital growth you may, or may not, get from your investment.
I find that a little obscene...and it goes a long way to explaining why most people hate banks.
On the matter of interest being tax deductable in the US on your home loan, as opposed to investment properties, I have read that too.
I firmly believe that should be the case in Australia too. The Govts of whatever persuasion clearly disagree...particularly strangely enough, conservative ones.
In an era when it has become completely obvious that pension schemes, be they Govt or private, are completely inadequate and will get more so in the decades to come, a tax system that doesn't seek to maximise a persons ability to self fund retirement is obscene in the extreme.
Not only do successive Govts NOT protect by legislation people from predatory profit taking from various retirement schemes but they double tax retirement funds by not making them tax free completely...let alone tax incentivised.
Across the board various 'institutions' make it their lifes work to remove money from one group (the vast majority) and place it in the hands of another (the minority). It's no longer acceptable to make a reasonable profit from whatever business you're in...you must make an increasing profit to appease shareholders. Banks are a CLASSIC example of this.
The price society is paying for this will one day explode in our faces, if it isn't already.
As you so rightly pointed out 7gcbc...people think increased equity in homes/properties means they are increasingly wealthy...they're not and these things merely serve to hide problems that blow up in our faces down the track.