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  • Should I pay off my mortgage instead of investing?

    Posted on Timeless Kathy Sammons 20 comments

    First of all it is important to really understand what you are dealing with in a mortgage.  So many people have mortgages that everyone just thinks that it is “normal”.  But, if we are knew what we were paying for, for that “privilege” we would be pretty upset.

    Well I am mad as *ell and I am not going to take it anymore! … Did you know that in the first five years 80% of your payment goes to interest?  Did you know that on a 30 year mortgage it is not until your 21st year of paying on that mortgage that you are half way done?  If you have a $200,000 mortgage at 6% interest for 30 year, by the time you get it paid off, if you have not applied any additional monies to principal, you will have paid a total of $431,677.

    Would it make since to keep some of that money for yourself instead of giving it to the bank?  I think so.  But aren’t there reasons to keep a mortgage?  Some people ask, “Should I pay off my mortgage instead of investing?”  Well, I say do both, look for a more balanced approach.  If you pay off your mortgage it is going to reduce your need for cash flow when you go into retirement.  You should try to get out of debt, times are uncertain, and the less debt you are shackled with, the better you are going to be able to deal with whatever economic difficulties arise.  It is clear, the banks have the population brain washed when it comes to paying off their mortgage.  Just remember it is the banks and mortgage companies making millions on all of that interest being paid.

    Other people say you need the tax write off.  Well a financial planner and author of Grow Your Money! 101 Easy Tips to Plan, Save, and Invest, Jonathan Pond, states that you need to be in the 35 percent tax bracket, or make at least $350,000 annually, for the tax break to be worthwhile. Most Americans are in the 25 percent tax bracket and they might pay, say $10,000 in mortgage interest but save only $2,500 in taxes.  Put another way, if you were in the 30 percent tax bracket and you pay $100.00 in interest, you get to write it off, so you reduce your taxes by $30.00 ($100 x 30%), but what about the other $70.00?  It would make more since to let the government keep their $30.00 and you keep the $70.00!  Now don’t get me wrong it is nice to have a write off for mortgage interest while you have a mortgage, but that is not a sound reason for having one.  In addition to that, the further along in your mortgage you are, the less you have to write off, reducing the benefit even further.

    Paying off your mortgage is the smart thing to do.  It is all in the math! If you pay taxes rather than paying interest, you are ahead of the game, as noted above.  Furthermore, if some of your money is in your house and not all in the market and the market crashes, guess what, you still have your house.

    Another consideration, however, is the state of the housing market.  Not everyone is in the same situation.  There are those that have purchased in the down market and it would be obvious that they would greatly benefit from this.  Those that are upside down, may not see the value of this, but if they want to keep their house, paying it off early would save them thousands of dollars in interest.  The amount saved in interest could turn their economic future around.   You should invest what you can in an investment program and find a system that helps you pay off your mortgage faster.

    To see how people are paying their mortgage off and discovering debt free living you can go to Living Debt Free, do not be fooled by the banks and lenders.  You can have a brighter future and help pass this wealth on to the next generation.  Come and learn so that you can teach them what your parents did not know.

    Thanks for reading my blog and blessings on your day,
    Kathy Sammons

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    • http://www.retirementinvestment.cn/?p=2993 The Not So Glory Days of Retirement | retirement investment

      [...] Kathy is helping people become debt free in a faction of the time, if you would like to see how follow this link: Pay Off Your Mortgage [...]

    • http://refinancing.awfullife.com/the-not-so-glory-days-of-retirement/ The Not So Glory Days of Retirement | Refinancing

      [...] What if you qualified to pay off your mortgage sooner and realized that you could retire comfortably? Follow this link to find out: Pay Off Your Mortgage. [...]

    • dottiberry

      great post, Kathy. I remember turning my head when I signed the mortgage papers for my home 2 1/2 years ago. Ugh! Why did I want to think about having a home paid off at the age of 84. Now, I am happy to say that I am on my way to paying it off in 12.8 years, saving me $297,000 in interest, thanks to the MMA. If people only realized … i hope they get one of your no-cost analysis. It will be worth their time to gather information from which to make an informed decision.

    • http://www.kathysammons.com/ Kathy Sammons

      Thanks for the note Dotti. Yes, I am glad that I used the MMA also. I got my house paid off just in time to sent my daughter to college. That was our plan, but we would not have been able to do it if it were not for the Money Merge Account. That was a great decision.

    • http://www.wekivaadventures.com martha carswell

      thanks for the info-I have been trying to decide what to do in this situation. I really think paying off my home will be the right decision.

    • http://www.kathysammons.com/ Kathy Sammons

      Martha,
      It feels great not having a mortgage and I have been able to focus my payments to paying for my daughters education. That has been a blessing. I like that she will not have any loans to pay off.
      Thanks for coming by,
      Kathy

    • http://www.BertMcClure.com Bert

      Great post Kathy,
      Yoru right, too many people think the tax right off is enough reason to buy a house. I knew that didn't sound right when I heard it.

      “the figures don't lie, liars figure” is an old phrase in the insurance business that come to mind when I read your post. Look like a great service your offering too.

      ~Bert

    • billpalte

      Hey Kathy,
      Great post….and yes, the math is quite different depending on who you talk to. Many people live for the tax deduction without realizing that they just keep digging the hole deeper. You have explained the math very well. Great job.

      Keep posting great info like this and I will have to keep coming back.

      To Your Continued Success,
      Bill

    • http://LinusRuzicka.com/ Linus Ruzicka

      LOL…it sounds like you've been listening to Dave Ramsey and his Financial Peace University course.

    • http://www.katherinedroguett.com Katherine Droguett

      Hi Kathy;

      Thanks for this useful information!

      Paying your mortgage early is a wise decision if you plan to stay in the house for years to come. It is an effective way of decreasing your interest down and be debt free in a shorter period of of time.

      Katherine

    • http://www.cassiestromlive.com cassiestrom

      Hey Kathy!
      So funny to see this post today …. I was just talking to my tax dude about this last week. Seeing the amount of interest paid each year just makes me sick! LOL
      Thanks for sharing :)

    • jeffmitchell

      That is funny, My grandmother for years put off paying her mortgage off for fear of it costing her too much in taxes, although she earned a fair amount of money I told her for a long time that she should pay it off as soon as possible.

      Thanks for the advice. If I ever buy another home I will def. pay it off as soon as possible.

      Jeff Mitchell

    • http://www.kathysammons.com/ Kathy Sammons

      I had never heard that saying, but it seems true to me. Like you said it is all in the math, and math is very black and white.
      Thanks,
      Kathy

    • http://www.kathysammons.com/ Kathy Sammons

      I agree with you. People do dig themselves in and do not even know it.
      Thanks,
      Kathy

    • http://www.kathysammons.com/ Kathy Sammons

      I have not listen to him but do know what he says. Funny you would say that, because I am right above him on Google for this keyword!!!
      Thanks,
      Kathy

    • http://www.kathysammons.com/ Kathy Sammons

      That is exactly right, Katherine.
      Thanks for your comment.
      Kathy

    • http://www.kathysammons.com/ Kathy Sammons

      Thanks for stopping by Cassie,
      I hope all is well,
      Kathy

    • http://www.kathysammons.com/ Kathy Sammons

      Some people just won't or can't figure that out. It is a little confusing and the lenders do not want you to do it.
      They want you to continue to pay them interest, so why would they want you to understand it.
      Peace…
      Kathy

    • http://www.kathysammons.com/ Kathy Sammons

      Thanks for you comment. I look forward to talking to you again.nKathy

    • http://www.mortgageapplicationcanada.com mortgage application canada

      Now this is a fantastic question. The real question is this, how much are your investments making you? If the answer is “more than my mortgage”, absolutely do not pay off your mortgage. For most of us though, the answer is an obvious yes!