Bruss’ favorable opinions on leveraging real estate...

Bruss’ favorable opinions on leveraging real estate are well-documented. But his specific argument implying that one should pay more dollars of interest so that one can recapture say, 30 cents in income tax savings is downright silly. While most professional investment advisers perhaps overstate when they say “don’t make investment decisions based upon tax consequences,” Bruss seems to stand alone at the other end of the spectrum.

From the homeowner’s standpoint, opting for the 15-year payment schedule is equivalent to investing the interest saved at an after-tax, virtually risk-free interest rate of, say, 5.6% (Bruss’ 8%, net of a 30% tax bracket savings). Historically, risk-free investments have not yielded anything approaching such a high after-tax return over such a long term.

Fifteen years down the road, a majority of homeowners will hardly pity the “fool” who owns his home free and clear; nor envy the “scholar” who still has 15 more years of mortgage payments facing him, albeit with a 30-cent tax reduction on each dollar of interest to be spent.

DEAN ALTSHULER

Los Angeles