Comments on: Should I Pay Off My Mortgage Early http://moneyning.com/debt/should-i-pay-off-my-mortgage-early/ A personal finance blog where we share insights on carefully saving money, investing, frugal living, coupons, promo codes because the little things matter in achieving financial freedom! Sun, 21 Mar 2010 19:25:36 -0700 http://wordpress.org/?v=2.9.2 hourly 1 By: Luke Luck http://moneyning.com/debt/should-i-pay-off-my-mortgage-early/comment-page-1/#comment-24037 Luke Luck Mon, 15 Feb 2010 22:54:47 +0000 http://moneyning.com/?p=3957#comment-24037 I disagree. The "Credit Card Chaser" Nov 5 post nails it. Most of us are not business owners, and in this economy the only thing that's certain is your debt. The idea of "arbitraging" your debt on a very low-risk investment that pays more than your interest is shaky at best today. Gamble with money you have, not with money you owe. If more people followed that advice, we wouldn't be in this economic situation. I disagree. The “Credit Card Chaser” Nov 5 post nails it. Most of us are not business owners, and in this economy the only thing that’s certain is your debt. The idea of “arbitraging” your debt on a very low-risk investment that pays more than your interest is shaky at best today. Gamble with money you have, not with money you owe. If more people followed that advice, we wouldn’t be in this economic situation.

]]> By: Luke Luck http://moneyning.com/debt/should-i-pay-off-my-mortgage-early/comment-page-1/#comment-24036 Luke Luck Mon, 15 Feb 2010 22:51:22 +0000 http://moneyning.com/?p=3957#comment-24036 I don't agree with that advice. I like "Credit Card Chaser's" Nov 5 post. Most of us are not business owners, and in this economy the only thing that's certain is your debt, so the idea of "arbitraging" your debt to get a very low-risk investment that pays more than your interest rate is shaky at best. In my experience the people who tell me to arbitrage my debt are trying to make an investment commission off of me, and I for one have made that mistake for the last time. Gamble with money you have, not money you owe. If more people followed that advice we wouldn't be in this economic situation. I don’t agree with that advice. I like “Credit Card Chaser’s” Nov 5 post. Most of us are not business owners, and in this economy the only thing that’s certain is your debt, so the idea of “arbitraging” your debt to get a very low-risk investment that pays more than your interest rate is shaky at best. In my experience the people who tell me to arbitrage my debt are trying to make an investment commission off of me, and I for one have made that mistake for the last time. Gamble with money you have, not money you owe. If more people followed that advice we wouldn’t be in this economic situation.

]]> By: Just An Onlooker http://moneyning.com/debt/should-i-pay-off-my-mortgage-early/comment-page-1/#comment-23189 Just An Onlooker Sun, 17 Jan 2010 00:20:02 +0000 http://moneyning.com/?p=3957#comment-23189 It amazes me how much advice there is out there with a bias towards the banking industry. That's right. All these people giving advise either work for the banks, try to sell something or simply don't get it. Why is is OK to pay an interest amount to a bank, but less OK to pay a tax to the state, or country where you live? Either way, money goes out of your bank account. Either to your mortgage interest, or your tax. If I had the choice, I would rather pay my taxes, than make someone else rich. (I do understand that in some cases, a business has to get loans etc...but as individuals not quite so). The way I look at it, paying off my mortgage is equal to a partial early retirement. If I don't owe anybody, I don't have to work, if I don't have to work I can navigate through work related issues easier. Not to mention, I will only have one master, instead of two (gov, and the banks). It amazes me how much advice there is out there with a bias towards the banking industry. That’s right. All these people giving advise either work for the banks, try to sell something or simply don’t get it. Why is is OK to pay an interest amount to a bank, but less OK to pay a tax to the state, or country where you live?

Either way, money goes out of your bank account. Either to your mortgage interest, or your tax. If I had the choice, I would rather pay my taxes, than make someone else rich. (I do understand that in some cases, a business has to get loans etc…but as individuals not quite so).

The way I look at it, paying off my mortgage is equal to a partial early retirement. If I don’t owe anybody, I don’t have to work, if I don’t have to work I can navigate through work related issues easier. Not to mention, I will only have one master, instead of two (gov, and the banks).

]]> By: Credit Card Chaser http://moneyning.com/debt/should-i-pay-off-my-mortgage-early/comment-page-1/#comment-21210 Credit Card Chaser Thu, 05 Nov 2009 19:31:08 +0000 http://moneyning.com/?p=3957#comment-21210 It's worth mentioning that everyone is different and not all of us have the same risk profile. Some people (I would think you fall into this category) just simply sleep better at night not having any debt or any risky investments where other people can certainly handle a debt load if they are using that debt efficiently and either A) Arbitraging that debt by investing in something that pays a higher rate of return than the debt is costing them or B) Investing in an appreciable asset like a business, an education etc. Just food for thought because while freedom from debt is a good goal if you are a business owner then many times it is actually poor planning to not take on debt at times (i.e. if you can get acquire money via debt that costs you 15% but yet you can get an ROI on that same money of 30% with your business then not taking on debt is a bad decision). I am not really disagreeing with you though generally speaking because most people that would read my comment would totally miss the point and just think that I am giving them license to rack up a bunch of credit card debt so that they can buy a new big screen TV (which is the exact opposite of an appreciable asset or a cash flow producing asset :) ) It’s worth mentioning that everyone is different and not all of us have the same risk profile. Some people (I would think you fall into this category) just simply sleep better at night not having any debt or any risky investments where other people can certainly handle a debt load if they are using that debt efficiently and either A) Arbitraging that debt by investing in something that pays a higher rate of return than the debt is costing them or B) Investing in an appreciable asset like a business, an education etc. Just food for thought because while freedom from debt is a good goal if you are a business owner then many times it is actually poor planning to not take on debt at times (i.e. if you can get acquire money via debt that costs you 15% but yet you can get an ROI on that same money of 30% with your business then not taking on debt is a bad decision). I am not really disagreeing with you though generally speaking because most people that would read my comment would totally miss the point and just think that I am giving them license to rack up a bunch of credit card debt so that they can buy a new big screen TV (which is the exact opposite of an appreciable asset or a cash flow producing asset :) )

]]> By: Lydia aka Ms. MoneyChat http://moneyning.com/debt/should-i-pay-off-my-mortgage-early/comment-page-1/#comment-21193 Lydia aka Ms. MoneyChat Wed, 04 Nov 2009 23:55:37 +0000 http://moneyning.com/?p=3957#comment-21193 Uhm, heck yeah, pay off the mortgage! That's my vote. I don't do ANYTHING, and I mean ANYTHING, just for a tax deduction. There's got to be other factors at play. I'm w/Credit Card Chaser, if you want a tax deduction, find a charitable organization (or two or three) who's mission lines up with your values and make donations to them. The tax effect is the same and charitable contributions, like mortgage interest, are still allowed if you're hit with AMT - just thought I'd add my own flavor of complexity;-). Uhm, heck yeah, pay off the mortgage! That’s my vote. I don’t do ANYTHING, and I mean ANYTHING, just for a tax deduction. There’s got to be other factors at play. I’m w/Credit Card Chaser, if you want a tax deduction, find a charitable organization (or two or three) who’s mission lines up with your values and make donations to them. The tax effect is the same and charitable contributions, like mortgage interest, are still allowed if you’re hit with AMT – just thought I’d add my own flavor of complexity;-).

]]> By: Making a Will UK http://moneyning.com/debt/should-i-pay-off-my-mortgage-early/comment-page-1/#comment-21150 Making a Will UK Tue, 03 Nov 2009 15:02:46 +0000 http://moneyning.com/?p=3957#comment-21150 Hi, I gave mortgage for many years. Not as a broker, but as the person who actually granted the loan and administered it. This gave me a great insight to how mortgages work. I frequently had customers who would ask if they should repay their mortgage or invest from the proceeds of a recent windfall. The safe thing was always to reduce your borrowing and then invest the later. That way, the world can go crazy but your house is always yours. Do not let the tax cart get ahead of the safety horse, and do not underestimate the risks associated with investing. Hi,

I gave mortgage for many years. Not as a broker, but as the person who actually granted the loan and administered it. This gave me a great insight to how mortgages work.

I frequently had customers who would ask if they should repay their mortgage or invest from the proceeds of a recent windfall. The safe thing was always to reduce your borrowing and then invest the later. That way, the world can go crazy but your house is always yours.

Do not let the tax cart get ahead of the safety horse, and do not underestimate the risks associated with investing.

]]> By: Credit Card Chaser http://moneyning.com/debt/should-i-pay-off-my-mortgage-early/comment-page-1/#comment-21034 Credit Card Chaser Fri, 30 Oct 2009 07:41:37 +0000 http://moneyning.com/?p=3957#comment-21034 Ideally it would be nice if everyone would have large enough charitable contributions every year so that the mortgage interest deduction is second in size to the charitable contributions... Ideally it would be nice if everyone would have large enough charitable contributions every year so that the mortgage interest deduction is second in size to the charitable contributions…

]]> By: Daniel @ Sweating The Big Stuff http://moneyning.com/debt/should-i-pay-off-my-mortgage-early/comment-page-1/#comment-21025 Daniel @ Sweating The Big Stuff Thu, 29 Oct 2009 18:46:16 +0000 http://moneyning.com/?p=3957#comment-21025 Good point, I guess perception makes a huge difference! Good point, I guess perception makes a huge difference!

]]> By: Financial Samurai http://moneyning.com/debt/should-i-pay-off-my-mortgage-early/comment-page-1/#comment-21017 Financial Samurai Thu, 29 Oct 2009 16:28:42 +0000 http://moneyning.com/?p=3957#comment-21017 Hey Mike - Thanks for your examples. Some things to note: 1) The higher your total income tax rate, the less one is inclined to pay off the mortgage. 2) You can only deduct interest up to $1million in mortgage indebtness. Hence, any big ballers out there want to limit their mortgage level up to $1million for tax efficiency reasons. Sooner or later, you'll pay off your mortgage if you keep working. You should aim for an amortization schedule to pay off all debt when you WANT to retire. If you don't retire for another 20 years, then you've got 20 years to pay it off for example. David, thanks so much for tweeting the $1K giveaway post the other day btw. Really appreciate it! Best, FS Hey Mike – Thanks for your examples.

Some things to note:

1) The higher your total income tax rate, the less one is inclined to pay off the mortgage.

2) You can only deduct interest up to $1million in mortgage indebtness. Hence, any big ballers out there want to limit their mortgage level up to $1million for tax efficiency reasons.

Sooner or later, you’ll pay off your mortgage if you keep working. You should aim for an amortization schedule to pay off all debt when you WANT to retire. If you don’t retire for another 20 years, then you’ve got 20 years to pay it off for example.

David, thanks so much for tweeting the $1K giveaway post the other day btw. Really appreciate it!

Best,

FS

]]> By: MoneyNing http://moneyning.com/debt/should-i-pay-off-my-mortgage-early/comment-page-1/#comment-21014 MoneyNing Thu, 29 Oct 2009 16:14:58 +0000 http://moneyning.com/?p=3957#comment-21014 You already have the student loans (that's a sunk cost). Finding out that you can deduct the taxes are definitely a fortunate event! As to Roth, I would definitely contribute to that. If you are diligent in your contributions to your retirement vehicles, you will have a big enough nest egg where just withdrawing money from say a 401k/IRA would put you in a high income bracket 40 years down the road. You already have the student loans (that’s a sunk cost). Finding out that you can deduct the taxes are definitely a fortunate event!

As to Roth, I would definitely contribute to that. If you are diligent in your contributions to your retirement vehicles, you will have a big enough nest egg where just withdrawing money from say a 401k/IRA would put you in a high income bracket 40 years down the road.

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