Should I pay off my mortgage instead of investing?Posted on Timeless 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,
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