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[quote=Anonymous][quote=Anonymous]OP here. To the pp who brought up the tax deduction angle: we are sort of clueless on that benefit. How much 'savings' are we talking about, back of envelope?[/quote]

OK, some rough calculations, say you buy a $500,000 house and put $75K down. That leaves you with a mortgage of $425,000. Let's assume a 30 year mortgage at 4.125% (what my credit union is currently advertising).  For simplicity, say your annual real estate taxes will be about $5000.

Ignoring escrow payments and PMI, your monthly mortgage payment would be $2059 (with escrow probably closer to $2600). In the first year of your mortgage, almost all of that $2059 is paying off interest, not principal. So, plugging those numbers into an amortization table shows you that in the first year, about $1450 of each payment is just towards interest. So you're paying a total of $17,400 in interest the first year. Which is tax deductible. As is the $5000 in real estate taxes.

So, now you have a $22,400 tax deduction you can take. If you were itemizing deductions before, this is just an addition to whatever you were deducting. If you weren't itemizing and just using the standard deduction before, you will now also add in state tax, charitable contributions, any personal property tax, etc. The standard deduction for married filing jointly is $12,200--so you can see that it clearly makes sense to itemize now. I'm going to assume you weren't itemizing before? I'm guessing between DC taxes and some other things you'd probably have at least another $10,000 or so in deductions. So, adding all of that together--you have $32,400 in deductions--or about $20,000 more than you had when you were just using the standard deduction.

Your combined income is $158K,  with deductions, etc, your marginal federal tax rate is 25%. I think the DC marginal tax rate is 8.5%. Add those together, and you get 33.5%. Multiply that by $20,000 and your tax savings are $6700 a year, or $558 a month.

This is all a little bit of guess work since I don't know exactly what your tax situation is, what you were deducting before, and I'm ignoring things like health savings accounts, childcare deductions, etc that could all play into it. If you were already itemizing, your tax savings would actually be a little higher (closer to $600).

So, if your mortgage payment is $2600, your effective payment after you consider tax savings is more like $2000 or $2050. In other words, if your rent is $2000--your mortgage paying power with no change to your bottom line, is about $2550.[/quote]

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