How much does the mortgage interest deduction really save people? Using one of the various mortgage calculators out there, I stuck in a $200,000 loan at 5% for 30 years. In the first year, the interest is about $10,000. So you would get to deduct that from your gross income, and do the other things to get your taxable income. If your tax rate is 25% (Seems reasonable for a $200k home), you save $2,500.

Does $2,500 "more" taxes in a year bankrupt so many people? And that's the most that a person with a $200,000 home would change. Each year after that, less interest is paid.

If I'm going to go bankrupt over $210/month, I bet I can cancel cable TV and go with a pre-pay phone, etc. to avoid going bankrupt. If that won't save me, then it wasn't the mortgage interest deduction that was the savior.