1% Mortgage Loans… What's The Catch? II

To compound the effectiveness of selecting the 1% minimum payment you should save what you save.  For instance, let’s say you refinanced your home with a 1% mortgage loan, paid off all your credit cards, and reduced your monthly payment by $1,000 a month. Now, if you save that $1,000 a month for yourself instead of giving it to your creditors, you will have $60,000 in cash at the end of five years - And that’s with a zero percent return. Here’s the second benefit to selecting the 1% minimum payment option:
Tax savings. If you make an interest only payment your mortgage balance will stay the same.  If you make a 1% minimum payment you are actually paying less than interest only.  Therefore, you are creating deferred interest which makes your mortgage balance increase each month. Before you freak out, keep in mind that deferred interest is mortgage interest and is therefore tax deductible.
Let’s say your home is going up in value $2,000 a month.  The 1% mortgage loan will allow you to take a small piece of that appreciation, say $500 a month, and turn it into a tax deduction. So you are taking a small piece of your equity each month and turning it into a tax deduction.  If you did not do this, all of your appreciation would be locked up in equity.