If you just want a bigger deduction, you can borrow against the existing equity in your home. Just make sure that you expect an after tax return on the money you take out that is greater than the after tax cost of the loan.

As for the optimum house cost, there is no easy answer. It depends on a lot of things. If you are someone that spends a lot of time at home, it's probably worth more. If you and your family are rarely there, you should spend less.

Once you are getting the core financial things taken care of - adequate retirement savings, college savings, emergency reserves, and savings for expected major future expenses, I think you should do whatever you want with the rest of your money. If having a more expensive house is worth more to you than having better cars, better vacations, better stuff, more money saved, or whatever else you'd do with the money, then get a more expensive house. Personally, I find that people that underspend on houses, cars, and stuff, tend to be happier because they are less stressed about money.

It sounds like you are thinking about getting a bigger house so that you can have a larger tax deduction for mortgage interest, right? So you are willing to pay more interest to a bank soley for the pleasure of getting perhaps a third of that back by paying less federal income tax? A person would really have to hate paying taxes to chose to pay a bank twice their tax savings for the priviledge of doing so.

35% of your net income.

It should include your insurance, mortgage, and money set aside for routine repair/maintenance.

Let's see if I get this straight. You want to pay a bank MORE money in order to pay Uncle Sam LESS money with the net result being that you have less money overall. But, you will have the satisfaction of knowing that your money is going to the private sector and not the public sector.

Go for it!

How about tax free munis? That beats the hell out of spending on extra interest. Think about it... how much house can 4 people roll around in? TF munis d not generate taxable income (get them in your state).

Listen to what the other posters are saying - It makes no sense whatsoever to get a higher mortgage in order to get a bigger deduction. I agree with gina - look into a Muni bond!

Everyone isnt taking all the facts into account. Not only does he reap the tax benifits, but it is a highly leveraged investment in most circumstances. I purchased a much larger house than I needed, partially for a write off, and also because interest got so cheap a few years ago. I locked in at 4.6 fixed. Now take that rate and think about the write off on say a 300k home, roughly 14k a year. How much does housing appreciate in your area? If you can combine house appreciation and write offs for taxes to surpass your interest rate, arent you making money with the banks money?

Since you seem to have a sound financial plan,it surprises me that you'd think about a larger home solely for the tax wrie-off.Now, if you WANT a larger home,regardless of tax issues/possible price appreciation, then do it. But don't do it as a part of a financail plan, becuase that'd be a mistake

These is a substantial body of opinion that says that house prices in a number of areas of the U.S. are somewhat too high - so if you plan to buy larger than you need in order to achieve a larger number of dollars later on selling ...

... it might be unwise to count on it ...

... unless you plan to own the house for a substantial number of years.

Some have used to term "bubble" with regard to current house prices.

It is often unwise to assume that because it acted that way in the past, it will continue to do so.

As a number of folks who were considering only the experience of a few prior years found out, recently, in the stock market.

Good wishes for wise use of your money.

ole joyful