We have enough money to pay off our 30 year morgage ( 29 years left) and a little money left in the bank. We were going to put it in our retirement fund, but think it might be better to pay off the house. Anyone know if it would be benificial one way or the other (tax wise etc)
2006-10-15 12:02:17 · 11 answers · asked by Cherie 2 in Home & Garden ➔ Other - Home & Garden
Yes pay off the house. The interest you will save over the 29 years can be put into savings over the years.
2006-10-15 12:05:37 · answer #1 · answered by Gone fishin' 7 · 0⤊ 1⤋
No. That is a deduction against your taxable income (a good tax-shelter and we have precious few of those kinds left for the ordinary person). Also the contributions to a retirement account is deductible and tax deferred until after you reach 70 1/2.
We continued to make payments because after my husband retired, I was still employed and a year before I retired, we started doubling-up on our payments until just before I retired a lump sum payed off the loan. (By then the debt had almost been completely retired.)
Naturally our household income is less and we don't need that tax shelter anymore.
Invest in some good Dogs of the Dow stocks that pay dividends or put the money in highest interest CD's you can get. You might need the cash and this way you wouldn't have to borrow for an emergency. It's better to diversify your holdings: owning a home free and clear is not good enough nowadays because repairs and unexpected family needs can arise when liquid assets come in handy.
You might ask your CPA or tax accountant to see what he/she would agree.
2006-10-15 16:55:21 · answer #2 · answered by Lynda 7 · 0⤊ 0⤋
I don't know what type of mortgage you have or the interest rate, but I will bet it is no more than 6.5% or so. Do not pay it off. Even though you will be saving many dollars over the next 29 years, you may pay the house off and then something happens that you need the money.
i.e a baby - you will need to feed it clothe it, send it to school, take it places, and all of that, but then you might not have enough money because you lump summed your house mortgage and have no money to spare.
Disabling illness or injury is another good example.
Just plain fun is another - perhaps you have topass off a trip to Italy.
What we are talking about here in Economic terms and financial terms is "opportunity costs." There may be other things you might want to do with that money and can't. You can invest it, but be careful. You can buy rental property and become a slum lord.
2006-10-15 12:28:08 · answer #3 · answered by Polyhistor 7 · 0⤊ 0⤋
If you are paying a high rate of interest then it may be beneficial to pay off the house. However, if you are itemizing your tax deductions, you will lose the benefit of having the interest deduction. Also, you always want to have enough liquid assets in case you lose or job - generally you want six months of expenses saved just for that potential problem. If you have a 401k plan, try to put the maximum away each year ($15K for 2006). You are saving federal taxes on that deferral and many employers offer some kind of match to your deferral. This question is not a yes or no type of question; everybody's financial situation differs and I would suggest that you connect with a financial advisor who can really look into your details.
2006-10-15 12:15:46 · answer #4 · answered by crazzi12000 2 · 1⤊ 0⤋
I don't know about tax wise but I would definitely pay off the house. Then I would Max out my retirement funding from my pay check. Since your home costs the most to pay off, you would be saving a ton in interest. (even though it is small after 30 years it adds up to alot) Also you wouldn't have to worry about something happening and NOT being able to pay the mortgage. A home is the one investment it is wise to keep, so you'll always have a place to lay your head. Just remember to keep up the insurance for protection. Hope this helped a little.
2006-10-15 12:08:26 · answer #5 · answered by Lori 3 · 0⤊ 1⤋
What type of mortgage do you have?
If you have the balloon, rider, or ARM mortgage then pleeeeeeease pay off immediately because you cannot imagine how many paperwork I have to do due to bankruptcy.
If it is a fix mortgage below 5% (5-6% is the inflation rate), then I would not pay off the 30 year mortgage.
Another factor is, what is the interest rate in your retirement fund. If you are doing through 401K, I wouldn't do it because every 10-15 years the market will crash and you will lose a lot of money. Not to mention that you still have to pay taxes. Instead I would buy another property and rent it out.
2006-10-15 12:07:23 · answer #6 · answered by SweetBrunette 5 · 0⤊ 1⤋
pay it off. an average house increases 7% per year. you would have to find an investment that beats that in addition to the interest you pay on the mortgage. then take the money you now spend on your mortgage and invest it. if you make 5% plus the annual 7% increase in your home value you have a pretty good deal.
2006-10-15 12:09:59 · answer #7 · answered by Anonymous · 0⤊ 0⤋
If given the opportunity I would pay off my house, In later years if something happened you could always use it as collateral to borrow. I think that is an investment you should never pass up.
2006-10-15 12:09:45 · answer #8 · answered by Anonymous · 0⤊ 0⤋
make double payments if you like. Keeping a mortgage is good for your credit history and you can deduct the interest from income taxes!
2006-10-15 12:11:53 · answer #9 · answered by Bawney 6 · 0⤊ 0⤋
pay off the house now, invest the payment every month. its much better to be out of debt
2006-10-15 12:21:47 · answer #10 · answered by hillbilly named Possum 5 · 0⤊ 0⤋