Is there a calculator for this on the net?
2007-01-19 10:21:44 · 6 answers · asked by Anonymous in Business & Finance ➔ Personal Finance
It is only better to pay it off, if all your non-deductable debts are paid off first.
2007-01-19 10:31:00 · answer #1 · answered by Feeling Mutual 7 · 1⤊ 0⤋
You don't need a calculator.
If you can invest the funds for a greater return than the rate on your mortgage, keep the mortgage. For example if you have a 5% mortgage and can get 7% return on your investment, keep the mortgage. If you can't get a better return -- say if the mortgage is at 8%, dump it.
To get a somewhat more accurate figure, adjust your mortgage rate for the value of the deduction. That's the amount that the total interest paid exceeds your standard deduction. The standard deduction is $10,300 for a married couple. If you have $4,000 in itemized deductions plus $7,000 in mortgage interest, the mortgage is only worth $700 in deductions, or a tax saving of about $175.00 per year if you're in a 25% tax bracket.
2007-01-19 19:17:24 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 1⤋
Obviously the deduction does not make up for the interest expense but that's not the most important variable in making a good financial decision on whether or not to pay off you mortgage. The tax benefit is important in order to calculate your effective cost of the mortgage but only in order to compare your effective rate with the after tax return you could otherwise earn on the money you would use to pay off your mortgge. Simple example: mortgage rate=6%, tax bracket=28%, effective rate on mortgage after tax deduction=4.32%.....if you could earn better than a 4.32% after tax return on another option such as a diversified investment portfolio than don't pay off the mortage and instead invest the money appropriately.
2007-01-19 18:50:45 · answer #3 · answered by SmittyJ 3 · 1⤊ 1⤋
The answer is pretty simple.
Your payment = ?
savings on taxes = far less than just interest on your mortgage payment, let alone principal!!!
answer: pay off your mortgage. Because the savings to your taxes will be less than the amount you save by pocketing your payments plus the interest. The interest alone will be far more than you can save by using the deduction on your taxes. You can always deduct home improvements. But at least the mortgage payments can be used for paying off other debts or home improvements etc...
2007-01-19 18:32:40 · answer #4 · answered by t_fo_sizzle 3 · 0⤊ 1⤋
For every dollar in interest you pay it will save you 25 cents in taxes assuming you are in the 25 percent tax rate.Lets say you pay 4000 in interest this year,then you would right this amount off your taxes but since you are in the 25 percent bracket it will lower your tax bill by 1000.
2007-01-19 19:39:03 · answer #5 · answered by Anonymous · 0⤊ 1⤋
pay it off the interest you save will be much more and you dont have the debt
2007-01-19 18:25:42 · answer #6 · answered by Anonymous · 0⤊ 1⤋