BellaOnline Forums Money Investing Should I pay the mortgage off??

Also posted this in the Home Finance section....

I would like some input as to what you all would do in this situation. If you had the option to pay your mortgage off by making extra payments to the principal, would you do it?.... OR....would you put all of the extra money (and pay only the minimum towards your mortgage) into a high interest-bearing account of some sort (say, 8% if that's even likely to get) and pay off the mortgage whenever you've accumulated enough cash?

Let me know what you would personally do. Thanks!

That depends on what the interest rate is on your mortgage and if it's a fixed rate.

If your mortgage rate is fixed and the investment interest is more than the mortgage interest than I would invest. If the mortgage interest is more than what the investment would return then I would put the money toward the mortgage.

If the mortgage interest is variable then I would put my payment toward the mortgage, because I believe the interest rates are going to continue to rise.

I definitely agree with Amoeba that if your interest rate is an ARM you should go ahead and pay it off as interest rates will continue to rise.

But my decision would also be affected by how much money I had, which in turn, would determine how quickly I could pay off the mortgage. If, for example, I could pay off the mortgage in 5-10 years I would go ahead and do that.

If not, I would definitely invest MOST of the money, but save enough to make an extra mortgage payment per year. As financial advisors say, 1 extra mortgage payment per year on a 30 year fixed mortgage means paying off the mortgage 7.5 years earlier and saving all that $$ in interest.

I would go for paying off the mortgage and out and out owning a home.

I am sure I should look over the situation more carefully, but I would go for being out from under a mortgage as quickly as possible.

You would also have to figure in the tax deduction you recieve from the mortgage interest to see if it would be worth it.

I've lived mortgage-free for many years, and it got us through some tough times, not having that worry. I recommend putting it on the mortgage.

I understand that you get a tax deduction from mortgage interest -- but you also pay taxes on the interest you gain from the investment, which brings the net down, as well.

And currently, the safe bets tend to all have really low yields.

For me, it would come down to peace of mind.

Mortgage tax deductions are important so if you're making a lot of money, you definitely need that. But you can possibly offset that with the maximum IRA deductions. I haven't calculated the difference.

But there is something to be said for waking up debt free in the morning. I long for that day.

We went for the pay-off. We're not experts (or even very good) at playing the stock market, so that led our decision. My accountant agreed we were doing the right thing for us, and the interest write-off isn't enough reason alone to keep a mortgage.

My parents always encouraged me to put money in mutual funds, but either my timing sucks, or I don't pay enough attention, and that never does very well for me. On the other hand, my DH bought a house when he was young and that has proved to be by far the best investment he's ever made. So, I feel really good thinking about it as investing in real estate instead of stocks.

You paid off your house. That is fantastic for you!

I know what you mean about the mutual fund timing thing. We gave up on financial brokers too. They just steer you to the funds where their companies get the best kickback.

Thanks Denise! We made it our goal and it took 10 years of work, but it was well worth it. The added bonus for us, living in CA, is that property taxes are so high based on real estate prices. We sold our first house and bought a different one in a more rural area about 6 yrs ago, so we went from paying prop. taxes in the pre-Prop 13 range, to paying WAY more on the new (old) house. I really don't know how we'd afford to pay a mortgage on top of these prop taxes too. It's crazy!

I definitely agree that workings towards paying off a house loan more quickly is a great way to go. You save a great deal on interest, you have peace of mind about not losing your home. Knowing your home is safe is such a powerful stabilizer ...

[quote=WestCoastDenise]Mortgage tax deductions are important so if you're making a lot of money, you definitely need that.quote]

I took a class through Crown Financial Ministries a while back and they recommended completely paying the mortgage off. People assume you're in for it when tax time comes around because you don't have mortgage interest to write off, but what they recommended is to give to charities the amount you were paying on mortgage interest (for us it's about $700/month right now).

Just think of the benefits other people could receive from your responsible planning - and you get to write it off all the same on your taxes so you don't owe any more/less than you did before! I think this is what we'll end up doing...all in good timing!

Thanks for all of the feedback!

I agree completely. You may also ask about the IRA deductions to reduce income which helps for retirement.