Your Mortgage Is Cheaper Than Your Taxes

If you are like most North Americans, you've just paid your federal income taxes. The good news is that another year's taxes are out of the way. The bad news is that the tax burden just keeps getting bigger for all of us.

A study in Canada by the Fraser Institute, a conservative think tank, puts the average Canadian tax burden at almost 50% of income. As bad as that seems, at least it includes comprehensive health insurance. In the US, the average income tax is just about 33%, but then you have to add on sales tax, property tax, and the cost of health care, which likely brings the average American household to the same inglorious total cost for taxes and health care as any Canadian pays.

In fact, if you are an average North American, you pay less for your mortgage than you pay for taxes.

In the US, you actually get to deduct your mortgage interest from your taxes -- which makes your mortgage an even better deal, since you can reduce your tax burden by owning a home. In Canada, while you don't get to deduct your mortgage interest, you do get to sell the home you live in without having to pay any capital gains tax. So, in either case, you win.

The bottom line is that there are only so many ways to build wealth: the first one is to avoid paying taxes; the second one is to buy assets that will hold or accrue value. While some may disagree, I think your home will help on both fronts. And you have to live somewhere, right?

But don't pay more for your mortgage than you have to. Even if you can deduct your interest costs, it's still better if you don't pay it in the first place. Get your best rate; shop around and get a few mortgage quotes before you sign on the dotted line.  

Michael Chantrel 

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