27 years old, No other debt. What are the positives and negatives of doing this? Taxes, credit, etc.
2007-12-21 08:55:20 · 6 answers · asked by J S 1 in Business & Finance ➔ Personal Finance
Yes.
No matter what "tax breaks" you might lose, the opportunity to be completely debt-free is worth it. It's not just an emotional thing...consider this: If you have no debt (including a mortgage), you then have the most powerful economic force working for you that there is: Your Income. And you'll have 100% of it to allocate the way you see fit.
You should definitely pay off your mortgage. Once that's done, then you can begin investing.
2007-12-21 08:59:20 · answer #1 · answered by Scotty Doesnt Know 7 · 2⤊ 1⤋
I couldn't disagree more with Scotty.
Two ways to look at this: investment viewpoint versus emotional viewpoint. Choose which one or combination is best for you. Paying of your mortgage at age 27 is fantastic!
INVESTMENT VIEWPOINT: A typical mortgage carries an interest rate of 6% and you get to write off 25% of that interest on your taxes. That has a net investment rate of roughly 7.5%.
The stock market typically returns 9% per year. These past few months have been a bummer. However, some mutual funds have returned 30% over the past year (international funds FIGRX, for example, and Fidelity Contrafund FCNTX).
EMOTIONAL VIEWPOINT: Being debt free as Scotty argues. However, if you use up all your spare cash to become debt-free, what happens if you have a sudden unexpected expense (a new roof, medical emergency, loss of your job or income stream)? Most financial planners advise having at least 6 months of income in an emergency fund.
2007-12-21 09:08:36 · answer #2 · answered by Anonymous · 0⤊ 1⤋
Depends on your mortgage rate, mostly. If it's really low and you could safely invest to higher ROI than the rate you're paying then invest. If it's higher and you'd have to gamble to make a better ROI than pay it off.
It also depends on how long you plan on keeping the property. Right now the real estate market sucks, but if you plan on keeping the house for 5-10 years there's a very VERY high chance (exceptions only being you try to sell in another down market period or your neighborhood goes south) it's going to be a great investment with a nice ROI in itself.
Lots of factors to consider, but if completely in doubt, pay off the house, because once you own it, even if financially everything else in your life goes south no one can ever take it away from you (save the good Lord and natural disasters - always ensure) and you'll always have that "uh-oh" equity standing by.
2007-12-21 09:11:26 · answer #3 · answered by Some dude 4 · 0⤊ 1⤋
The very fact that you could own your own home freehold in only 5 years is amazing. Well done you!
The house itself is an investment. And I've come to believe that the 30's are the new 20's.
I can not think of any major negs.
2007-12-21 09:05:11 · answer #4 · answered by Anonymous · 2⤊ 0⤋
I'd put away $4k per year in a Roth IRA and use whatever is left over to pay off your house. Invest and pay off your mortgage simultaneously.
2007-12-21 10:02:57 · answer #5 · answered by Dave 2 · 2⤊ 0⤋
It is like this, you can not earn in interest what you loose in interest.
That is how the banks make money. They take your money, lend it to you for more then what they pay for it.
So you will be money ahead to pay off the debt.
2007-12-21 09:05:54 · answer #6 · answered by teamepler@verizon.net 5 · 0⤊ 0⤋