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If I have cash to pay off mortgage, am I better off paying it or keeping the loan.? |
House is in USA. My brother who manages 401(K) plans said this to me: Why pay a buck to save 40 cents? (Refering to the income tax deduction). It's good to have enough cash or liquid assets on hand to pay living expenses for 6-months to a year in case you lose your job. Given current interest rates for savings, you are probably better paying down the mortgage than holding onto the cash. Certainly paying of debt is a sure investment. Investing in stocks is risky. If you have credit card debt or consumer debt such as cars, pay them off first. The referenced article shows you how to do the math to decide what is best for your particular situation. Source(s): http://beginnersinvest.about.com/cs/pers... the longer you wait the more interest you will pay on it. so go ahead and pay it off, and that way if you wanna sell it for some reason, it's a 100% pure profit, right into your pocket. Please rate me! thanks Pay it. You won;t be wasting money on interest, you're free to do with the property whatever you want, including improvements and demolition without permission from lender, and you will have equity. However, you may consider paying a lot and then investing some. it depends on the rate you are paying and the time remaining, but if it is in the 5-7% range you would be better off investing the money in the stock market where you can get a greater return then the 5-7% mortgage you are currently paying Probably keeping the mortgage. Here's how you figure it out: What is the mortgage actually costing you, after taxes? Remember you get a deduction on your income taxes for mortgage interest. What can you earn in investment income from the money you keep if you don't pay off the loan? If you come out ahead by paying off the mortgage, do so. But if your money is actually doing more for you by being invested and giving you a tax break, keep the mortgage. Another thing to keep in mind is that you can deduct a whole lot of other things on your taxes if you have enough deductions to itemize. If you don't have any mortgage interest, you may have to take the straight deduction rather than itemizing and that could be a disadvantage. But talk to an accountant before you do anything. Personally, if it were myself, I would pay off the mortgage and then buy an investment property. I think there are a couple benifits to this. One, you still have some type of write-off on your taxes, you have additional income to cover the other mortgage, and if something were to happen and you lost your job, you could sell of the other home, perhaps pay some capital gains if you had any gain in equity, and still have no mortgage on your primary residence. I think ultimately it could raise your net worth. Thats what I would do. |
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