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"The way to look at is this. Your mortgage carries an interest rate of let's say 8%. If you put that \$83 dollars toward you mortgage, essentially what you'd be doing is getting a return of 8% on your \$83. Or you might choose to put that \$83 in the market. You're probably going to make more than 8%. Possibly more like 10% to 15%."

There are lots of 'ifs' in the above statement.....

But let us assume your mortgage rate is 8%.....

If you don't have lots of other deductions to get you above the itemized deduction threshold, or if you earn enough so your itemized deductions start to disappear (phase out), you are not getting any benefit from 'tax savings'......

If you have a \$80,000 balance, with 8% interest, you have \$6400/yr interest expense.....of which, most is not benefitting from being in that standard deduction range......so you don't benefit a lot..

The other thing, as many people have found, is that putting money in the market is not a sure thing....if you had gotten a big bonus in March of 2000, and rather than making a big payment toward your mortgage, you sunk it in the market in march of 2000, you would be down 10 or 20%, depending what you put it in...if you stuck it in high tech, you could be down 80%....

"trust me" the math works??? Yes, it does, and big time NEGATIVE. Try telling that to someone who did the above...it works, and your return was 20 or 30% less than if you had paid down your mortgage by that amount. You got a guaranteed 8% return on your money...vs a 10 or 20% loss.....nearly a 30% difference......

In times of high inflation (where you are paying back with less valuable dollars), then it makes sense to not pay back the loan quickly. In times of low inflation, for many people, it is a draw.....

Now, if we are talking of slowly paying down your mortgage, ie, double payments(chop mortgage by 3/4 or so) , or 13 payments a year instead of 12 (which will cut the mortgage in half), you will still be 'investing' in your house with each extra principle payment.

Since the best 'guaranteed' type rate of return on CDs or treasuries is now under 7%, getting 8% guaranteed isn't that bad.....

Then again, I would put extra money into IRA/401K first (get tax deferment and not pay current tax on the money, always a good idea), make sure you have at least a six month MM fund of emergency cash, participate in discount stock plan if you have it, and then consider extra payments toward mortgage.....

Having a 'paid for' house, especially when you are thinking of retiring, is a great feeling, and minimizes your monthly need for current income.....

Doing a house refinance, and taking money out is often the most stupid thing people do.....they take their 'savings' and 'investment earnings', and literally blow them of luxury goods they don't need..... that money, either left in, just refinancing the current balance, or taken out and immediately put into long term, index funds or equivalent, could be worth millions at retirement, and a 10 to 15 year EARLIER retirement date.

However, the temptation is there to 'release' all the equity in your house, and spend spend spend.......and most people do.....dooming them to work until 65 to pay for their lifestyle.....(of often 'frills').

If you can't afford it out of current income, and pay cash for it, you shouldn't be buying it (other than a first car, and a house).

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