Comments on: The Top 5 Reasons to Pay Off Your Mortgage? http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Thu, 24 May 2012 22:27:00 +0000 hourly 1 http://wordpress.org/?v= By: Comment on The Top 5 Reasons to Pay Off Your Mortgage? by top 5 … http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/comment-page-1/#comment-341970 Comment on The Top 5 Reasons to Pay Off Your Mortgage? by top 5 … Sat, 02 Aug 2008 17:22:37 +0000 http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/#comment-341970 [...] Read the rest of this great post here [...] [...] Read the rest of this great post here [...]

]]> By: top 5 pay off your mortgage early websites http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/comment-page-1/#comment-341894 top 5 pay off your mortgage early websites Sat, 02 Aug 2008 15:12:16 +0000 http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/#comment-341894 [...] [...] [...] [...]

]]> By: IowaMike http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/comment-page-1/#comment-149839 IowaMike Wed, 10 Oct 2007 21:28:18 +0000 http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/#comment-149839 There is also the "fiction" or "possible fiction" of your home interest being tax deductible. Most of us currently pay, or will be paying, AMT, which pretty much eliminates many tax deductions. If you are paying AMT (last year my bill was almost 10K) then you are taking too many deductions on your federal taxes. Since you cannot get rid of state income taxes, or real estate taxes, reducing your other tax deductions (you can't pay off your little children so mortgage interest will have to do) will "save" (i.e. cause your AMT burden to be less) you money. This should also be a consideration when calculating the value of paying off a mortgage vs investments. Investing the money (assuming you max out on 401ks & IRAs) potentially creates an income taxable event while paying off the mortgage reduces not only liabilities (interest) but also reduces the amount of AMT one may pay (especially those with either high mortgage balances, in high state or real estate tax states, or some combination of those)which is in essence a double tax. There is also the “fiction” or “possible fiction” of your home interest being tax deductible. Most of us currently pay, or will be paying, AMT, which pretty much eliminates many tax deductions. If you are paying AMT (last year my bill was almost 10K) then you are taking too many deductions on your federal taxes. Since you cannot get rid of state income taxes, or real estate taxes, reducing your other tax deductions (you can’t pay off your little children so mortgage interest will have to do) will “save” (i.e. cause your AMT burden to be less) you money. This should also be a consideration when calculating the value of paying off a mortgage vs investments. Investing the money (assuming you max out on 401ks & IRAs) potentially creates an income taxable event while paying off the mortgage reduces not only liabilities (interest) but also reduces the amount of AMT one may pay (especially those with either high mortgage balances, in high state or real estate tax states, or some combination of those)which is in essence a double tax.

]]> By: Q Yuan http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/comment-page-1/#comment-114588 Q Yuan Wed, 20 Jun 2007 19:08:14 +0000 http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/#comment-114588 It only makes sense if you can not make more than your mortgage rate. Otherwise, why pay it off early? If you have refinanced during the last 5 years, it is possible that your mortgage rate is lower than some online banking's saving's rate. In that case, why not have your money earn more money by not paying the mortgage off early? It only makes sense if you can not make more than your mortgage rate. Otherwise, why pay it off early? If you have refinanced during the last 5 years, it is possible that your mortgage rate is lower than some online banking’s saving’s rate. In that case, why not have your money earn more money by not paying the mortgage off early?

]]> By: Private Mortgage Banker http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/comment-page-1/#comment-109906 Private Mortgage Banker Mon, 04 Jun 2007 10:28:41 +0000 http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/#comment-109906 If you have a 30 year amortized loan then you are not saving only the interest by paying off your loan you are saving the Net Present Value of the actual payments which include principal portion. If you have a 125,000 loan at 6.65% then your payment is around $800 principal and interest. So in terms of cash flow by not making the $800 x 12 payments of $9,600 you are giving yourself an immediate return $9,600 on your $125,000 loan which equals. Let's assume you are in year 10 of your mortgage...your principal balance is around 108,000 now. Your annual payments are still $9600. So your return based on cash flow is 9600/108000 or almost 9%. At year 15 your principal balance is approx 92000. Your return then is $9600/92000 or 10.4%. These are risk free rates of savings. Therefore...when your principal balance falls to the level where to total of your annual payments produces a risk free rate of return...THEN if you have the proceeds...PAY OFF THE MORTGAGE. If you have a 30 year amortized loan then you are not saving only the interest by paying off your loan you are saving the Net Present Value of the
actual payments which include principal portion.

If you have a 125,000 loan at 6.65% then your payment is around $800 principal and interest. So in terms of cash flow by not making the $800 x 12 payments of $9,600 you are giving yourself an immediate return $9,600 on your $125,000 loan which equals. Let’s assume you are in year 10 of your mortgage…your principal balance is around 108,000 now. Your annual payments are still $9600. So your return based on cash flow is 9600/108000 or almost 9%. At year 15 your principal balance is approx 92000. Your return then is $9600/92000 or 10.4%. These are risk free rates of savings. Therefore…when your principal balance falls to the level where to total of your annual payments produces a risk free rate of return…THEN if you have the proceeds…PAY OFF THE MORTGAGE.

]]> By: Michael Chantrel http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/comment-page-1/#comment-105640 Michael Chantrel Sun, 20 May 2007 10:51:34 +0000 http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/#comment-105640 Since this post is based on my original post on 5 reasons to pay off your mortgage, I think I'll jump into the fray here! Not everyone is going to take their "extra" money and invest. In fact, the vast majority of folks are paying off their mortgage (and hopefully their credit card bills, but certainly not always) and happily spending the rest on whatever catches their eyes. If they have money in a 401(k), they are already unusual. To assume that folks will take their spare cash (if they have any) and invest in something other than what the local bank offers them is ... REALLY unusual. The mortgage is tangible. The house is tangible. If it's not the 'best' investment, it sure beats the heck out of having no investments of any kind! I'm absolutely not against investing -- as long as you are also paying off the mortgage as quickly as possible. After all, there's lots of time for investing, with money that really is "spare cash", if you get that mortgage deep six-ed as soon as possible. Since this post is based on my original post on 5 reasons to pay off your mortgage, I think I’ll jump into the fray here!

Not everyone is going to take their “extra” money and invest. In fact, the vast majority of folks are paying off their mortgage (and hopefully their credit card bills, but certainly not always) and happily spending the rest on whatever catches their eyes. If they have money in a 401(k), they are already unusual. To assume that folks will take their spare cash (if they have any) and invest in something other than what the local bank offers them is … REALLY unusual.

The mortgage is tangible. The house is tangible. If it’s not the ‘best’ investment, it sure beats the heck out of having no investments of any kind!

I’m absolutely not against investing — as long as you are also paying off the mortgage as quickly as possible. After all, there’s lots of time for investing, with money that really is “spare cash”, if you get that mortgage deep six-ed as soon as possible.

]]> By: AllFinancialMatters » Blog Archive » I Owe DB an Apology! http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/comment-page-1/#comment-104736 AllFinancialMatters » Blog Archive » I Owe DB an Apology! Wed, 16 May 2007 15:05:38 +0000 http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/#comment-104736 [...] As if you guys couldn’t already tell, I’m quite passionate about personal finance. That passion really comes through when I talk about mortgages. Why? I don’t know. I just does. Anyway, the other day I posted a critique of a blog post that was referenced on Debt Blitzkrieg. By mentioning the fact that she liked the post in one sentence and then tearing into that same post in the next sentence, I left the impression that DB was stupid. That was not my intent at all. [...] [...] As if you guys couldn’t already tell, I’m quite passionate about personal finance. That passion really comes through when I talk about mortgages. Why? I don’t know. I just does. Anyway, the other day I posted a critique of a blog post that was referenced on Debt Blitzkrieg. By mentioning the fact that she liked the post in one sentence and then tearing into that same post in the next sentence, I left the impression that DB was stupid. That was not my intent at all. [...]

]]> By: lorax http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/comment-page-1/#comment-104560 lorax Tue, 15 May 2007 23:16:02 +0000 http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/#comment-104560 Asset allocation/risk view: I've probably said this before, but a mortgage is a negative bond. If you own a GNMA fund, you might even be paying yourself (and a middleman). So, if you pay down your mortgage, you might need less bonds/money market/emergency funds and can put more in stocks. It all depends upon your ability to weather risky situations. There's lots of factors here (income, age, emotional risk tolerance, etc...). Asset allocation/risk view:

I’ve probably said this before, but a mortgage is a negative bond. If you own a GNMA fund, you might even be paying yourself (and a middleman).

So, if you pay down your mortgage, you might need less bonds/money market/emergency funds and can put more in stocks.

It all depends upon your ability to weather risky situations. There’s lots of factors here (income, age, emotional risk tolerance, etc…).

]]> By: db http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/comment-page-1/#comment-104559 db Tue, 15 May 2007 23:15:48 +0000 http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/#comment-104559 I have removed the original post from my blog, which was a link to the article plus a short comment about how I liked the idea and would feel free to not have a mortgage payment. I am not speaking about mortgages in JLP's blog again. DB I have removed the original post from my blog, which was a link to the article plus a short comment about how I liked the idea and would feel free to not have a mortgage payment.

I am not speaking about mortgages in JLP’s blog again.

DB

]]> By: Morgan Edge http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/comment-page-1/#comment-104550 Morgan Edge Tue, 15 May 2007 22:39:01 +0000 http://allfinancialmatters.com/2007/05/14/the-top-5-reasons-to-pay-off-your-mortgage/#comment-104550 I put my mortgage on a 15 year mortgage. It is a trade off for my risk adverse wife. My wife hates debt so much that she wants me to pay off zero interest purchases early! Paying off the mortgage early gives her a peace of mind that a slighty higher net worth will not achieve. Investing is not a purely logical exercise. Paying off the mortgage meets my wife's emotional need for security as she defines it so it is well worth it for us. Also, in 12 years, I will be 55 with a paid off house, college paid off (hopefully!), and solid retirement savings. AT that point I will feel secure enough to do whatever I want workwise: retire, keep working, take an easier job, travel, whatever. With no mortgage and no 529 payment, I will feel free as a bird. I put my mortgage on a 15 year mortgage. It is a trade off for my risk adverse wife. My wife hates debt so much that she wants me to pay off zero interest purchases early! Paying off the mortgage early gives her a peace of mind that a slighty higher net worth will not achieve. Investing is not a purely logical exercise. Paying off the mortgage meets my wife’s emotional need for security as she defines it so it is well worth it for us.

Also, in 12 years, I will be 55 with a paid off house, college paid off (hopefully!), and solid retirement savings. AT that point I will feel secure enough to do whatever I want workwise: retire, keep working, take an easier job, travel, whatever. With no mortgage and no 529 payment, I will feel free as a bird.

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