Pay off the house?

[bill-jr]

I know its been talked about on here but i guess my digging skills are not that great . . .
What are the pros and cons of paying off the mortgage ? ?
Owing less then 10k on the house has made my brain want to just go ahead and take care of that bill. . .
Im not sure how the tax man figures in but my interest is always far less then the standard deduction . . .
Being as you all are valkyire riders i figure you must know all there is about mortgages and taxes . . .

[shortleg]

  You can  look at a few things, first is the loan company takes care of
your taxes and insurance in your monthly payment.
  You will have to make provisions to do that yourself.
 Next the 10K you owe and can pay is it making money for you?
   Some may say that right now CASH is king others maybe not.
 Being raised by a depression baby I was always told to owe no body anything.
    I always paid cash for my motorcycles and anything that my family
could live without.
    But you must sit down and look at it one thing at a time.
 You will have to set aside monthly for taxes and insurance.

[Bighead]

Bill I been mulling that over myself but figure what the hell use their money and keep mine. Even if I go to term only two more years and my house payment is less than you can rent a crack row apt for. So I guess mine will go to term as I have zero deductions anyway.

[Dave Ritsema]

In the state I live in we get a mortgage exemption on our taxes each year that is relatively significant. It might be advantages to consider holding a small mortgage if there are tax advantages.

A friend of mine does the same thing in another state and all he needs to do to qualify is to have a mortgage loan with a certain credit balance that he can use if he needs it but with a zero balance he is not charged anything monthly. He keeps it at $500 a year, just enough to qualify for the mortgage credit.

[Oss]

what I can say is do not let anyone talk you into a refi if you owe 5 yrs or less on the mtg UNLESS there is something you need badly and you wont max out your deductions

This is because 1st month you pay 99.9%  interest and 359th month 99.9% principal  It is how the amortization chart works

Paid off mine a few years ago  It was a 15yr 4.25%

Good thing as I am making nothing now with court closed

[pais]

Bill, remember that as your mortgage approaches completion, you are paying almost all principal and not much interest.  So unless you have a really high interest rate you are not going to have huge savings by paying it off.  You have to determine: If you paid it off this month and had a need for $10k next month, would you be Ok?

              

[Jersey mike]

Without knowing your financial position and I’m not asking, if you are currently comfortable and have income every week/month guaranteed or are absolutely certain you will continue to have income on a regular basis I would pull the trigger on cutting your current balance in half.

Make the $5k payment now, continue making your monthly payments and don’t touch the other $5k until this economic situation we’re in resolves itself in 6 months.

Or, for the final $5k add $200-$250 each payment ( or every other payment) if you’re comfortable doing so. Either choice you’re covered. You’ve reduced your mortgage, have cash on hand and are still bringing down the balance at either the same pace or a bit more rapid. If something happens the additional payment can be stopped, hold onto the cash as needed and you can continue with your normal payment.

[Willow]

Paying interest so you can deduct it from your taxes makes no sense.  As taxes never go to 100% that is a losing proposition.

The only real question is the interest rate you're paying versus the expected return percentage on your investments.  If the interest rate is more then pay it off.  If it's less then keep your money for now.

[Robert]

I agree with Willow and if you have enough cushion to get you by in a crunch then pay it off. The extra money you have each month can be saved like you had a mortgage. It can be the extra payback to the money you took out of your savings. Like a loan to yourself, plus if anything happens its one less worry.  

[cookiedough]

Pay off the house unless you interest rate on house is dirt cheap or you cannot live comfortably by paying it off in full in one lump sum.  I was 23 years old at the time got new house and had a 25 or 30 year mortgage and decided in my late 30's to pay off my house done before age 40.  Not sure anymore, but interest rate back in 1993 was like 5-7 percent and nothing much out there investing would return much more at the time safely doing so had money so spent it all and have been mortgage free for over 10 years now. 

I see no reason to keep making payments unless you have a 1-2 percent interest on the house which doubt you do.  Is still costing  you interest and burning/wasting money out the door paying that interest even if only 10K or so left on the house.     Plus,  I never ever could itemize deductions the standard deduction was always more since I did not have HUGE mortgage payments on my small house. 

[Sorcerer]

We ran our mortgage to the end of its term. My wife says, o boy we got spare money now. I said no we don’t. I started an account titled home , taxes and insurance. The same amount goes into that account each month that is equal to what our mortgage payment was. The house and garage roofing  we’re going to need replacement at some point. Paid cash. Driveway, new curb and gutter, new garage siding paid cash. Our furnace, A/C is from 1989, we’re on borrowed time but we have cash set aside. Eventually the deck will need to be replaced. A house is some what like owning a boat.

[Rams]

Willow is correct.   

I decided to pay off all my debts and have done so.   Feels good.
All my assets are in both my name and my wife's.   When I go, it's hers'. if we go together, the kids are already taken care of.   We also put everything into either a trust or, upon our demise the kids get it.   Makes planning much easier and living our daily lives much more enjoyable.

Rams

[ridingron]

I was going to pay my house off also. Then it all hit the fan a few months ago. I decided to keep my cash. My insurance and taxes are about $275 a month and interest is down to $45 a month. Not much I can do about those. I throw about $100 a month extra at the principle and waiting to see how this "crises" plays out.

[cookiedough]

We ran our mortgage to the end of its term. My wife says, o boy we got spare money now. I said no we don’t. I started an account titled home , taxes and insurance. The same amount goes into that account each month that is equal to what our mortgage payment was. The house and garage roofing  we’re going to need replacement at some point. Paid cash. Driveway, new curb and gutter, new garage siding paid cash. Our furnace, A/C is from 1989, we’re on borrowed time but we have cash set aside. Eventually the deck will need to be replaced. A house is some what like owning a boat.

Unless you got a BIG boat,   I bet you thrown tons more into a home on fixings than most fishing boats for sure.  If AC and especially furnance are from 1989 you are getting lucky there.  Our 1993 furnance clunked out few years ago did not want to invest money in new burners all rusted not allowing gas to go thru as well as the gas box thingy where the gas lines go into inside might have been bad as well.  Might as well invest that 200-300 bucks in a new furnace which got a good deal cost us 1500 is all installed on a new 97 or was it 98% efficiency Amana furnace.  Everyone else was 2200-2500 in price range. Pays to call around for places that install furnances my mother in law got taken her cost similar sized small house furnace was over 3 grand  installed -  OUCH!    That old comfortmaker gas furnace 80% efficiency was touchy trying to keep the burners lit gas kept shutting off all the time the last few years of use.   I went thru a lot of ignitor coils breaking and cleaned the porcelain rod flame sensor often each winter to keep the darn thing going.

[phideux]

  You can  look at a few things, first is the loan company takes care of
your taxes and insurance in your monthly payment.
  You will have to make provisions to do that yourself.
 Next the 10K you owe and can pay is it making money for you?
   Some may say that right now CASH is king others maybe not.
 Being raised by a depression baby I was always told to owe no body anything.
    I always paid cash for my motorcycles and anything that my family
could live without.
    But you must sit down and look at it one thing at a time.
 You will have to set aside monthly for taxes and insurance.

That isn't exactly true. The loan company can handle the taxes if you set it up they way, they just add it to the mortgage and put it in an escrow account. They will also add insurance to your mortgage that benefits them, in most states you are required to pay insurance until your mortgage reaches a certain point. The insurance will be of little benefit to you.
I haven't had a mortgage in years, but when I did, I paid my own property taxes and carried my own insurance. Where I got my insurance from benefited me and was alot cheaper than whet the bank was offering.

I'm one from the pay it off crowd. Once paid off, still stash what you used to pay towards your mortgage. Emergency fund, toy fund, whatever.

[98valk]

never pay off a house. let the bank take the risk and not you. keep your money liquid.

https://www.edelmanfinancialengines.com/insights/home-ownership-and-mortgages/qa-how-do-you-account-for-risk-with-a-big-long-mortgage

Q&A: How Do You Account for Risk With a Big, Long Mortgage?
The answer to this question may surprise you.

1 Minute Read

Question: About your advice to carry a big, long mortgage: How do you account for risk in this advice? What if people lose their jobs, their investments don’t pan out or they spend the money instead of investing it? Then they could lose both their houses and their money. Would you change the mortgage advice if a person had substantial assets outside the value of his/her home? I doubt that Bill Gates carries a mortgage, and I doubt that you would advise him to have one.

Ric: It appears you have never viewed my 90-minute video on the topic or read my books The Truth About Money and Ordinary People, Extraordinary Wealth, which cover this topic in detail. I encourage you to do so.

You’ll discover that the risk of job loss is precisely why you need a big, long mortgage! Yes, that’s counterintuitive, but spending a little time with OPEW will clarify it for you. In short: The fellow who gave the builder all his money, buying the house with cash to avoid a mortgage, is in trouble when he loses his job — because he has no money to buy food, clothes, medicine, etc. But the fellow who kept his cash and used the bank’s money to buy the house has plenty of cash to maintain his lifestyle while he looks for another job. So, while it may surprise many people, the person with the mortgage is in a safer position than the fellow who owns his house outright.

[Oss]

I stand behind my prior post in the thread

If that is your concern get a credit line mortgage but don't borrow against it  In fact HIDE the checkbook in your safe deposit box or strong box

I have a 100k credit line and also unsecured lines of credit that I have no balance on

They are emergency pockets that i hope to never use

Why pay off a mortgage in the last few years?  You are paying virtually nothing on the interest it is all
PRINCIPAL at that point in time

Finally, think about a fireproof filing cabinet  Get em used for cheap put in the basement or garage concrete slab

You will never replace those pictures, family stuff birth, death baptismal certs etc  keep em safe

My friend just lost everything Friday when his house caught fire  Even if you just  scanned them into the cloiud its something but a place to keep originals  that is priceless

[..]

Finally, think about a fireproof filing cabinet  Get em used for cheap put in the basement or garage concrete slab

You will never replace those pictures, family stuff birth, death baptismal certs etc  keep em safe

My friend just lost everything Friday when his house caught fire  Even if you just  scanned them into the cloiud its something but a place to keep originals  that is priceless

Yes
Yes
AND
YES!!!

DO IT.

[Wizzard]

do not know about other states but in IN if you have any kind or mortgage at all your property tax can be half of what it is without a mortgage.
At least here its beneficial to keep one as long as you can.

[F6Dave]

Paying interest so you can deduct it from your taxes makes no sense.  As taxes never go to 100% that is a losing proposition.

This is more true than ever now that Trump's tax cuts increased the standard deduction to $24,400 for a married couple.  You need a big mortgage and/or lots of other deductions to make itemizing worthwhile.

[Jess from VA]

I paid my house off.  I didn't need to, I wanted to.  It felt real good to do so.  I saved a few thousand in interest, and what (annual) interest there was was not enough to beat the standard deduction, so that was no help to me.

It didn't draw down my life savings enough to be any worry.

Also, it grew my checking account handsomely (over time), since the mortgage (principle, interest, tax, insurance) was far and away my biggest monthly bill.  (Yeah, I still have to pay the tax and insurance).  

So my retirement income of pension and social security was increased by my mortgage and interest payments, monthly.

After a few years, it paid (cash) for my new truck out of checking, instead of going to life savings (or drawing down the checking account to bupkus).

Also, I keep thinking about selling and buying another home in a state with laws and taxes much better than my state.  Going through that big goat rope will be a bit easier if it's paid off.

This decision, however, went directly against my lifetime policy of keeping as much of my money in a big pile as I can, and resisting paying any of it out to anyone I don't absolutely have to.  I still think this is a good policy.    

[98valk]

I look at it this way.  200K in a bank, better in a credit union or 200k sitting in a paid off house and still paying property taxes. housing market drops, now have less than 200k property taxes the same or goign up.  if needed to move for any reason, could be worth even less market conditions, even more so after selling fees.
Or the money is still somewhere making money for a person.
I've read the rich dad poor dad and Trump books, real estate should never be looked at as an investment since it is always a liability. can be an investment if one bought at the very low of a market and able to sell high.

[Ken aka Oil Burner]

I'll throw this out there. If anyone is worried about what will happen if you pay off your home, I'll gladly let you pay off my house and I'll let you know how it goes 

[Bighead]

I'll throw this out there. If anyone is worried about what will happen if you pay off your home, I'll gladly let you pay off my house and I'll let you know how it goes 

[Jess from VA]

I'll throw this out there. If anyone is worried about what will happen if you pay off your home, I'll gladly let you pay off my house and I'll let you know how it goes 

  

I think I will pass on that deal Ken. 

But are there any old bridges up there for sale? 

[phideux]

I'll throw this out there. If anyone is worried about what will happen if you pay off your home, I'll gladly let you pay off my house and I'll let you know how it goes 

  

I think I will pass on that deal Ken. 

But are there any old bridges up there for sale? 

I ain't got no bridges, but, I'm sitting on some prime real estate that once the ice caps melt will be ocean-front, make you a good deal.

[h13man]

Here in Indiana you get mortgage exemption credit on your taxes. Some say it's worth keeping a mortgage of some sort to keep tax rate low but how beneficial, don't know.

[Binkie]

I have no debt. No mortgage, no car payments and credit cards are paid off monthly. Plus I’m retired. It is very freeing to be able to tell big business to kiss my ass anytime I want.

[hubcapsc]

I've held debt. I've been debt free.

Pay off the house 

-Mike