Should I Pay Off My Mortgage

Paying off a 4 mortgage even with a tax deduction of the average 28 is like earning a risk free rate of 2 88 4 0 28 of 4.

Should i pay off my mortgage. So in the example that you had a 100 000 mortgage and 100 000 savings you may want to just pay off 75 000 of the mortgage and keep 25 000 savings. On a 150 000 mortgage at 5 with 25 years remaining paying off a 5 000 lump sum reduces the interest by 11 500 and means you repay 18 months earlier. Even if you have enough money to pay off your whole mortgage you should still try to keep some aside as a rainy day fund. If you re nearing retirement for example paying off your mortgage early could make more sense than investing that cash in the market and taking on unnecessary risk.

It puts you at risk. Nonetheless homeowners especially those with little time left in their mortgage term should carefully weigh the tax implications of paying off a mortgage balance with 401 k funds before. If you overpay your mortgage it doesn t just mean you have less to pay in future years it might mean that you can pay your mortgage off sooner sometimes even years earlier. Currently homeowners are allowed to write off the interest they pay on first mortgage loans up to 1 million.

If you have the opportunity to pay off your home and you don t pay off your home in order to keep the tax deduction that would be an indication that you are poor at mathematics. Max out on your retirement savings and pay off your mortgage. It doesn t lower your payment and when you need access to that cash. Laura on twitter asks dave to explain paying off the mortgage versus keeping it for the tax deduction.

It s a nice way of saying you re stupid and you believe cultural lies that are out there. Many mortgages today have rates of 3 5 percent to 5 5 percent so if paying off your mortgage early leads to a return equal to your interest rate that return is somewhat lackluster. So if you have a 4 5 mortgage paying that off is. Paying off your mortgage in its entirety eliminates any tax deductions on your interest payments you can write off as a borrower.