Quote:
Originally Posted by wowitsdark 
ETA: Any financial *expert* who tells you to keep a mortgage for the tax deduction is no financial expert and not worth listening to.
Say your house payment is $1,000/month, of which $700/month is interest.
That means you pay $8,400 in interest annually.
That means when you file your taxes you won't pay taxes on that $8,400.
There is no tax bracket as high as 50%, but if there was, you would save $4,200 in taxes thanks to having a mortage.
Great! You saved $4,200!
How much did you have to pay to save $4,200? $8,400!
Spending $8,400 to save $4,200? Is that a savings? Ummmm... no.
Pay off the house, and pay Uncle Sam $4,200 rather than paying Bank of America $8,400 and getting a check back from Uncle Sam for $4,200.
Just buy a safe CD with the $4,200 you *aren't* paying to Bank of America anymore. In ten years, your CD will probably have doubled and be worth $8,400. In another ten, you'll have over $17,000. And that is just from ONE year of NOT paying interest. Imagine if you did that every year for the next twenty years, rather than dutifully paying $8,400 worth of interest every single year to the bank, all so you could get a $4,200 refund.
We paid off our house five years ago. I haven't looked back on that decision in regret once.
|
It's not just about the interest deduction. What you are supposed to do is take the money that you would be using to pay off your house (at a low interest rate) and invest it in options that will make more.
IE: our house is currently at 5.25%. (A pretty low cost to use their money). Instead of taking extra money to pay that mortgage down, you are supposed to invest it. We have made way more than that (5.25%) on our investments.
Of course, it takes the discipline to actually make the investments and not spend the extra money.
We will pay off the house we plan to live in at retirement, but it's not worth it yet. Because if we paid our house off now, our money would be sitting in an asset saving 5.25%, instead of earning 15%-20% or more.
Everyone has their own way of doing things, but our financial planner tells us the same thing...not to pay off our house at this point in our life. (And he's a great financial planner). We're doing well with him.
Lisa