No. of Recommendations: 0

!Consider paying off mortgage. Some will argue that
!the interest is a tax write off, but interest paid
!is money lost. Even if you write off the interest,
!the tax deduction is only what your tax bracket is,

Mostly I agree with JLC, but the mortgage is the one on which I'd differ a little fractionally. I'd factor out two different issues for consideration:

1) risk

How big is your mortgage? Don't tell me, just think about the size of the mortgage. Consider how much of your income goes to paying for it. Now ask yourself what would happen if you became seriously ill and couldn't work. Could you survive financially on other income (salary of a partner/spouse, insurance, investments)? I like the mortgage balance to be low enough that you can shake off one or two hard financial blows in your life. I'd bet that some of those homeless folks you see on the streets once had a house with a mortgage, and they didn't shake off those blows when they came. This may be an odd way to look at things, but I guess that is just my risk-averse Canadian upbringing. :-)

2) financial benefit

Long-term average market growth is much higher than the average rate of interest for a mortgage. After all the tax advantages, I think you'd find that you do twice as well per year in an S&P 500 index fund than you do by paying down your mortgage. You could set up a separate "burn the mortgage" account, and put money into it each month. When the account was as large or larger than the mortgage, you could transfer enough money and then - yes - burn the mortgage contract. For a mortgage with a long life left in it, you would actually pay it off much sooner this way provided you have the discipline to leave that account untouched. Some people don't have that discipline, and then definitely they should just dump the money against the mortgage before it gets spent elsewhere.

As for me, I'm kinda straddling the fence. We add a little extra to each mortgage payment, we're in the process of getting rid of the non-mortgage debt, and after that is done the burn-the-mortgage account gets opened.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.