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Home Ownership
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Re: Paying off a mortgage in ten years and being hit by taxes

I get this question all the time. The problem is that people generally just focus on the tax deduction that they get by paying mortage interest.

Even when the top rate reverts to 39.6% in 2001, each $1 of mortgage interest you pay saves you $.396 in taxes. So wouldn't you be better off not to pay the $1 in interest, pay an extra $.40 in taxes, and put the remaining $.60 in your pocket?

Don't get me wrong. The mortgage interest deduction is a great deduction. And if you can invest your money, and get a better return than you are paying on your mortgage without taking on any additional risk, then you would probably be better to do so.

That being said, I am not a fan of having a mortgage for the sake of having the tax deduction. I've seen many clients over the years keep money in a savings account with a bank earning a token amount of interest, and then paying that same bank more than double that interest on their mortgage. The bank loves these type of customers.

Finally, with the ease of maintaining an equity line of credit, you can always re-borrow money against your home equity if you need to do so in the future.

Zip Code: 01801

Re: Paying off a mortgage in ten years and being hit by taxes

That makes a whole lot of sense. Thanks

Zip Code: 02114