Need to cut deficit will transform home financing

The way we buy and finance real estate is evolving. Real estate has always been subject to pendulum-like swings in value and attractiveness as an investment. Traditional assumptions underlying the buying decision have already started to change and will continue to do so. The recent national debate over the elimination of the long-sacred mortgage interest deduction is just the latest example of how this evolution in real estate is occurring. If the mortgage interest deduction is reduced or eliminated, the day-to-day cost of our existing homes will increase, possibly dramatically. Currently, under federal tax law, if you itemize your deductions you are allowed to deduct mortgage interest paid on the first $1 million in mortgage debt covering your principal residence, one second home and the interest payments on home equity loans up to $100,000.