[gr8fl4porsche]

BigBpainta - oops, I mean Brian993 is correct. Carrying a mortgage for the deduction is the biggest real estate myth out there - no doubt created by bankers and real estate agents.

Take the following basic example:

$200,000.00 house
$ 40,000.00 downpayment of 20% conventional loan to avoid pmi
$160,000.00 30yr note at 7%apr

$ 1,064.00 monthly payment for 360 months.
$ 130.00 per month applied towards principal
$ 934.00 per month to the smiling banker! ( in the beginning )
$ 11,208.00 interest in the first full year
$ 7,600.00 2001 standard federal deduction for married couple
$ 3,608.00 benefit of deductibility over standard deduction
$ 1,082.00 real benefit assuming a 30% tax base

So......

You give the smiling banker $ 11,208.00 the first year and you get to write off a whopping $ 1,082.00 in real dollars. Much better off starting up a failing home business every few years and claim a small loss of a couple thousand dollars each year. IRS does not like you to have lots of unprofitable business' over the years but as long as you keep it small you will not stand out.

But.....

I also think it is a bad idea to get rid of nest-egg cash and investments just to pay for a dream home. Real money is hard to come by and save. Coming up with a couple extra hundred a month is much easier than saving up $50k. I suggest finding a home you truly can afford, put about 5% down, carry the other 15% down as a second mortgage, finance the 80% for as short a term as you can or go the 30yr route and put any extra monthly cash into the p-car - I mean put out any extra monthly cash as additional principle payments - termed paying on the back side. Make sure the loan has no penalties for early payment.

Bottom line. You can live in a Porsche but you can't drive a house.
Keep the car - who wants a nice house with a big empty garage.