should I pay off my mortgage?

Question

My mortgage debt is 65K. I have that money in a money market making 4.5%. My mortgage interest is 5.88%.
After considering taxes, what is a better choice?

Answer 1

Depending on your tax bracket....YES if you cannot claim MORE than standard deduction. NO, if you can. The tax savings in deductable interest may be of greater benefit than paying it off. The opportunity cost of your money is the greatest consideration. Given your next best alternative....could you do better with your money besides paying off the mortgage? That seems to be a bigger question since it looks like you can take advantage of the debt expense on your tax return. However, could you do better with 65K in another investment?

I'd say that would be a better research question for you. For example, the interest earnings on the money market vs moving that to long term retirement or to a tax sheltered annuity may be a better plan. So, considering your need for the savings is also a big question. Do you have OTHER retirement funds? If so, then a riskier investment than a money market may work for you.

Answer 2

5.88 is a good mortgage rate. From a tax perspective, you're probably better off paying off the mortgage. However, you could put your money into a higher returning investment such as stocks or mutual funds and come out ahead. Another consideration is the value of having the $$ available in case of an emergency or changes in your financial situation. Something to consider as well.

Answer 3

You will be making more on your money by paying off your mortgage. Take the money from the mortgage etc and re-invest it back into a money market fund. With your house free and clear, check into what insurance your mortgage company required you to have, and see if you really need that insurance. You may be able to save there too.

Answer 4

Wish I had your problems. Keep the $65K in your money market. Sounds like you can afford to make the mortgage payments and you might as well let your savings keep earning compound interest. 4.5% sounds really good - too good to be risk free. My 401K earned 9% last quarter, but before that it lost money. If I could get a fixed 4.5% interest on my 401K, I'd be happy. I wouldn't touch it, that's for sure.

Answer 5

DONT SPEND IT ALL.

ALWAYS make sure you've got something left in case of an emergency, its good to have a safety net.

also, and this is kinda different.... i've known different people that always left the last $100 or so standing on the mortgage so that they never fully owned the house. this was because if there was some kind of accident, or they were being sued, they dont "own" the house, so it cant be taken from them. i think that it changes your taxes in some states too, but i dont know which ones.

Answer 6

Is this all the money you have in the world for retirement and etc? if so, no you should not because the interest is tax deducible and you need just in case of emergency money.
Do you have any other debt? If so, pay that off because other debt generally does not have tax deduction opportunities.
Do you have money in other places and no other debt? Then go ahead and pay it off!!!

Answer 7

keep your money..don't pay off the mortgage..

you may decide to sell & with an assumable mortgage means less money down for a potential buyer...

money is real...& reality could be that your home be damaged by any natural disaster, or fire , flood, & all your money be tied up...


keep your cash....

Answer 8

It's not just a mathematical question.

Having 65K can be a very useful thing if something Really Bad happens.

If I were you I wouldn't pay it off unless u have at least 120K liquid.

Answer 9

Pay off the mortgage.

Answer 10

Suzie Orman is a finacial specialist with a TV show and she answers questions like this live all the time. She also answers e-mails.