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Subject:  Re: Withdraw to pay down mortgage? Date:  1/30/2000  12:16 PM
Author:  FoolishProf Number:  18472 of 104258

Thanks for your quick response:

Personally if you can payoff the mortgage without paying penalties, I would be inclined to do so just
to clear the books and not have it hanging over your head.

This is not a consideration. I don't mind the "books" and the "hanging over" head part.

However, the best answer to your question depends on what return you expect to make with the
funds invested in the account (IRA? 401K?) compared to that 8% interest paid on the mortgage.

As I stated in my post, I have these funds over in the MM at about 5%. Have bunches of other $$ in S&P Index and individual stocks.

You can also factor into your calculation the discount that results from being able to take a tax
deduction on the interest from the mortgage.

Yes! This is an important part of my analysis that leads to my conclusion to wait until retirement -- even with the MM return of only 5% on the tax deferred funds. You will also note that my marginal tax rate is expected to move from 36% to 31% upon retirement.

If your account is conservatively invested in bonds, they may be paying 6% or so, so paying off the
mortgage makes sense. However, if they are Foolishly invested in S&P Index funds, last year you
made 21% return, so why give that up to pay off an 8%er. (Of course the real question is whether
the S&P can do anything like 21% in 2000.)

Is it unFoolish to have these funds in a fixed-rate investment if they are earmarked for mortgage retirement at some time within the next 5 years?

Best of luck to you.

Thanks much. And you too.

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