I would run the numbers on about how much you can save by itemizing i.e. getting a mortgage. Using 2025 brackets and some ballpark estimates:
No mortgage:
Fed standard deduction: $31,500
State standard deduction: $14,950
With mortgage of $480,000 of 6% (although if you use your equity and money market accounts to get relationship discounts of >$1M or >$2M, you should be able to get 0.5% - 0.75% off the base rate):
State tax liability (Using 7% effective tax rate): $28,703
Property tax (Using 1% rate): 1% x $600,000 = $6,000
Mortgage interest deduction: 6% x $480,000 = $28,800
Fed itemized deduction: $63,503
State itemized deduction: $34,800
Est. Fed tax savings (24% marginal bracket): 24% x ($63,503 - $31,500) = $7,680
Est. State tax savings (9.85% marginal bracket): 9.85% x ($34,800 - $14,950) = $1,955
Est. Additional that you are paying due to having a mortgage: 6% x $480,000 = $28,800
TL;DR: After factoring in tax savings, your effective interest rate drops from 6% to 3.99% = ($28,800 - $7,680 - $1,955) / $28,800 x 6%.
Arguments in favour of getting a mortgage:
No mortgage:
Fed standard deduction: $31,500
State standard deduction: $14,950
With mortgage of $480,000 of 6% (although if you use your equity and money market accounts to get relationship discounts of >$1M or >$2M, you should be able to get 0.5% - 0.75% off the base rate):
State tax liability (Using 7% effective tax rate): $28,703
Property tax (Using 1% rate): 1% x $600,000 = $6,000
Mortgage interest deduction: 6% x $480,000 = $28,800
Fed itemized deduction: $63,503
State itemized deduction: $34,800
Est. Fed tax savings (24% marginal bracket): 24% x ($63,503 - $31,500) = $7,680
Est. State tax savings (9.85% marginal bracket): 9.85% x ($34,800 - $14,950) = $1,955
Est. Additional that you are paying due to having a mortgage: 6% x $480,000 = $28,800
TL;DR: After factoring in tax savings, your effective interest rate drops from 6% to 3.99% = ($28,800 - $7,680 - $1,955) / $28,800 x 6%.
Arguments in favour of getting a mortgage:
- Promotions and raises that push household income into 32% bracket will further decrease your effective mortgage interest, because it gets you more Fed and State tax savings.
- Holding a mortgage makes your portfolio more diversified since you will have less real estate as a percentage of your portfolio.
- Holding a mortgage is a great inflation hedge.
- It's easy to put money into a house, but hard to get money out. Cash out refis cost you a minimum 0.25% in the best interest rate you can get compared to what you can get from new purchase financing.
- More optionality to take advantage of opportunities. If you decided to do investment real estate or invest in a friend's startup, it's nice to have more to work with.
- Opportunity to press your advantage if rates change. If rates go up, you win by being short bonds. If rates go down, you win by refinancing.
Statistics: Posted by train12 — Mon Dec 15, 2025 2:09 am — Replies 6 — Views 594