Originally Posted by wincrasher
Remember, even though something is deductible, you are still bearing an interest cost. So a 5% rate may end up costing you 3% after taxes.
Don't get suckered in when the salesperson, bank, & others tell you the interest is deductible. It is. But you don't get all the interest back dollar for dollar - or even close to that. A 5% rate will still cost you very close to 5% after the interest deduction. Here's a fun weekend exercise if you use software like TurboTax:
- Open up last year's return.
- Write down what your refund or payment was.
- Edit your return removing your home & / or RV interest deduction.
- See what your new refund or payment would have been.
- Figure our how many pennies you get back for each dollar of interest paid. You will be shocked at how low it is. Everyone's tax situation is different. In our case, we got back less than ten cents per dollar of interest paid.
(disclaimer: this does not directly answer the op's question about required down payment but should be a factor when making payment decisions)