ap2002

iTrader: (8)

got a question, a supervisor at work said that he already has a 15yr mortgage and wants to refinance again for another 15yr mortgage since the interest rates are low right now and his monthly note will come down.... well i asked him it would be better to refinance but to keep paying the same monthly just for less years and pay off his house quicker, right? he said he does not want to pay it off too quick cause then he wont have nothing to write off (interest) during tax season? he is about 42-44yrs old, is that a smart move?

I myself think differently, my wife and I want to start on our own 10yr future plan..... meaning, right now we have a 20yr mortgage, and would like to save and pay off the house in 10yrs, i will be 38yrs old then and house would be payed off right when my oldest son will be in his senior year in high school, right in time to be able to pay for his college/university. this sounds real good but I have never thought about the whole tax deal with the mortgage interest, how much does that mortgage interest really help out at tax time? Im pretty sure school will is not cheap either, but would we be able to claim my sons college costs then? well, i thought we were doing a smart move by having our own plan, that way our kids will be out of college by the time we are in our mid 40's, meaning early retirement for us!! or am i too young to be thinking too far ahead?

what is yalls opnion?

neodamonkey

iTrader: (7)

You can write off your kids college tuition as well.

But its difficult to answer your question because it really depends on the tax bracket you are in.....if write offs knock you down to the next tax bracket it could be worth it....but on the other hand if it does not knock you down then it would not be beneficial.

Personally i (this is going to come off wrong) dont care about tax write offs......everything will be so much easier without a monthly mortgage so we plan to pay ours off asap.


EDIT: you are NEVER to young to be thinking that far ahead.....those that think that far ahead are the ones who have a fairly easy life past 45 years old.

KWIKKAR

iTrader: (15)

Hey Needamonkey. Is that your Viper in the sig. If so I bid on that car on EBAY. How is it??

obseSSed

i got about $1700 back on my taxes this year, the majority of that was the interest on my mortgage and insurance. I'm single, no kids and i make ~$36k/yr while I'm in school. Without the house, I would've probably only gotten about $600-800 back.

Like Neo, I don't care about tax write-offs, and I didn't buy my house with that in mind. I'd love to pay off my house, but I don't plan on staying here for the rest of my life, so paying it off isn't really an option for me. Plus, I bought it $8k under appraisal back in 07 [not sure how that will hold up now], so I was ahead of the game anyway.

AgFormula02

iTrader: (13)

OK, you have to figure out what else would you do with the money to pay off your house.
For example, I don't plan on paying my house off. I refinanced at 5.00 percent, but the actual interest rate is closer to 4 percent once you figure out the tax benefits. If I can put my money somewhere else were it will earn more than 4%, why put it towards the mortgage?

CySevans

That's silly. I'd much rather have my house paid off than worry about interest deduction. Itemized deductions just lower your taxable income. You don't get all that interest back. So if you pay $12K annually on interest, and that deduction only lowers your taxes by a couple thousand dollars (depending on your tax bracket), you'd have a net of $10K in the bank at the end of the year by just paying the extra $2K to the IRS.

Not to mention I could also pocket 12 months of payments on top of that.

I am considering a refinance to shorten the loan. I did the math, and that would save me $80K on interest.

ap2002

iTrader: (8)

im also considering refinancing since the rates are real low, i figured if i refinance right now from a 20yr loan to a 15yr loan, just in five years i will save 48,000 dollars in interest alone! and keep my same montly note...

derrickman05

iTrader: (4)

Listen to Dave Ramsey!!!!!! Basically he said for what you are giving away in interest(and you are giving it away) it would be cheaper just to pay the taxes. He had a good point and sat down and did the math for this lady, he said: you are paying X amount in interest on whatever. then he said. the tax on thay was XX. So she was paying like 1000 in interest a year and taxes on it was like 300. or something like that. anyway read his books and watch his videos. I have my vette paid off and almost have the BMW paid for. ill be 100% out of debt in 2 years

CySevans

Listen to CySevans! He pretty much just said the same thing.

7420NW7TH

iTrader: (8)

Back when we were making double digit gains on our money in the stock market, that argument would be true. But today since the start market went straight to hell, then those who used the money to pay down their debts instead of investing are the smart ones. I wish I was one of those people.

CySevans

Listen to what you just said. The market went to hell. So how can you tell me you'd have been better off investing in something that just went to hell as opposed to eliminating interest accumulating debt that would put you in a better cash position down the road to protect you against this very thing? And a house is an appreciable asset unlike a car or credit cards. This economical situation we're in is not permanant. Housing prices will eventually go back up as will the stock market.

-Ross-

iTrader: (2)

I have a 30 year loan and pay about $300/month extra (towards principal). Just that little amount extra per month will cut the loan term down to about 13-14 years and save me almost $70k in interest payments.
For some reason, saving $70k and building equity quicker just appeals to me.

7420NW7TH

iTrader: (8)

That is exactly what Iam saying, that at this point it would been better to pay off the house instead of investing in the stock market. A few years ago, that was not the case though. Taking that money and investing it would have made you more money than paying down debt. I lost over 70k in the stock market just in the last year (basically half of what I had). But before the crash I was definitely making more money than the interest I was spending. Got it?

mondols1

iTrader: (2)

WHY SPEND A DOLLAR TO SAVE 25 CENTS (plug in the tax bracket for your last dollar earned for the "cents" above).

but most people do not have such a simple choice. a mortgage is a must so you can pick between adding to your mortg pmt to pay off the mortg early or you could invest those addl dollars instead.

the right answer is different from person to person but remember that our current investment enviorment has risk priced cheap and interset rates are low!

CySevans

Got it.

-ZW-

If I were him I would try and pay it off early and invest the money in ways that would provide secondary income like commercial/residential rental property or a small buisness. You might not make a whole lot of income from the property or buisness but at least you are investing your money and providing a tax relief for yourself.

old_goat

I say pay the thing off and be done with it. Even without itemizing you still get around (husband and wife no kids filing jointly and paying 1,000 in property taxes) 18,900 worth of deductions. I was bound and determined to pay off the house, in case of layoff or illness, the house was MINE!

A couple of things to remember, as you get closer to paying off your house, your mortgage deduction is less and less, and it may get to the point where you don't have enough deductions to itemize, even owing on the house.

I paid off my house early by using bi-weekly, which has two more payments per year, 26 bi-weekly half notes, versus 12 full notes. Toward the end, I was paying bi-weekly and another 500 or so on top of that. As we didn't have any credit card or car notes, it didn't kill us. We aren't rich, I work in the electrical industry as a journeyman, and the wife makes disability (under 850 a month at that time) due to her diabetes. Her diabetes got so bad she had to quit her nursing job. Quit, not retire, so no severance pay and no retirement plan or 401K either.

Paying off the house is great, but remember you have to pay for home insurance (1500-2000 for a regular sized house), maybe flood insurance (in my case 250 a year, neighbor right across the street around 2,000 or more a year), and real estate taxes in December-January. This includes county, city, school taxes and some others, which is around 2500 or so. Be sure and file your house as your legal homestead, which will lower the taxes.