This is the point where sensible planning comes into play. A person who chose to liquidate a portion of his or her investments to purchase a home would have trouble for two possible reasons. Cashing in certain investments would have seriously increased income due to capital gains. The resulting outcome would have been a high tax payment. The loss of the home mortgage interest deduction would also have had a negative effect on the person's tax status.
Many people rely on that interest deduction to substantially lower their tax bill.
Since many jumbo mortgages come with, or have the option of, no pre-payment penalties, it is not uncommon for homeowners to wait a few years before making any dramatic changes to their mortgage. Martin explains how once funds come due, through various investments, homeowners usually choose to pay down their mortgage. Many continue to pay down their mortgage as the extra funds become available, while others pay down a portion and then re-finance the remainder. This latter move still maintains some sort of mortgage interest deduction. The refinancing options available are roughly the same as those for the initial purchase.