anyone great a math to solve this challenge? if i have a 200,000 dollar mortagage at a fixed 5.125% apr for a fifteen years, would i benefit more by saving money if i make an extra month mortgage payment per year towards the principal or would i save more money if i did not pay the extra mortgage and took advantage of the tax deductions when i do my taxes?
if you also have read a book that would address this challenge, that would help, too...thanks
2007-04-14 07:10:18 · 3 answers · asked by ogg08 5 in Business & Finance ➔ Taxes ➔ United States
That's a real good mortgage rate. Mathematically, if you can get over 5.125% return on the extra money putting it somewhere else (in a CD for example) you're ahead to just keep the mortgage loan as it is and buy the CD with the extra cash. That doesn't even take into account the tax deduction for it - the breakeven taking that into account would depend on your tax bracket, but would be somewhere below 5% on your alternate place to keep the money.
If otherwise, if you don't pay down the mortgage, you're just going to spend the money anyway and not save it, on a nice vacation or something like that, then financially you'd be better off paying down the mortgage - but only you can decide what the vacation or other alternate spending is worth to you.
2007-04-14 07:41:23 · answer #1 · answered by Judy 7 · 0⤊ 0⤋
Interest expenses are not a dollar for dollar right off against taxes. You only get the break on the tax rate. So if your rate is 25%, then for every dollar you pay in interest you would only get 25 cents off your taxes.
It is always smarter to save a buck than to save the tax break.
Make your extra payments and pay less overall.
2007-04-14 14:15:26 · answer #2 · answered by Gem 7 · 0⤊ 0⤋
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2007-04-14 14:14:29 · answer #3 · answered by danhealth2007 1 · 0⤊ 2⤋