OT: Disadvantages to paying off your mortgage?

billsgirl · Nov 15, 2008

BillHill999 and I are coming into some inheritance money next year, and we are strongly considering totally paying off the 115K owed on our 300K mortgage.

Has anybody else done this?
Are there any disadvantages?

On the surface, this seems like a solid idea, as our interest rate is a little high.

RacerX · Nov 15, 2008

I paid mine off a few years ago. There are certain disadvantages to it, but the peace of mind it gives you is priceless....

steaktartar · Nov 15, 2008

Racer X said:
I paid mine off a few years ago. There are certain disadvantages to it, but the peace of mind it gives you is priceless....

agree........if you dont need big write off...pay it off

harrington · Nov 15, 2008

I worked in the financial field for years and many experts say always carry a mortgage. I say BULLSHIT!! Paying it off will far outweigh any tax write off. If you are paying 6% interest on the loan and you pay it off it is like making a 6% return. Do it.

FairWarning · Nov 15, 2008

I would pay off any CC bills in full before paying off the mortgage. At least your mortgage interest is deductable.

whalewager · Nov 15, 2008

what day are you getting it do you think? how much? where do you live?

ProPokerPlayer · Nov 15, 2008

Y pay it off? i thought the smart thing to do would be quit paying it period..you'll either get refinaced at a lower rate or even better Barney Frank will just buy it and let u live there for free.....

MikeB · Nov 15, 2008

Who are you two planning on killing next year?

I'm safe as you two are not listed in my will.

Presto · Nov 15, 2008

ProPokerPlayer said:
Y pay it off? i thought the smart thing to do would be quit paying it period..you'll either get refinaced at a lower rate or even better Barney Frank will just buy it and let u live there for free.....

Precisely.
Recent policy changes make you a sucker for paying a mortgage.
First quit or reduce your job since they will adjust your payment to no more than 38% of income.
Get 90 days behind and be rewarded with a huge discount in your monthly payment.

Woody0 · Nov 15, 2008

FairWarning said:
I would pay off any CC bills in full before paying off the mortgage. At least your mortgage interest is deductable.

As mortgage interest is tax deductible you need to calculate the effective interest rate of borrowing that $115K then decide whether you can do better by investing the money. Some say stocks are currently a generational bargain.

Whatever you do you need to be comfortable with your decision and able to sleep at night. That is the prime concern since you don't need to make unecessary stress in your life.

D2bets · Nov 15, 2008

How high is your rate? Why haven't you refinanced? Nothing wrong with paying it off, but make sure everything else is paid off first plus have a decent rainy day account. If you run out of cash it may not be as easy or cheap to get the money back out of your house. Plus depends on your tax rate

HiPockets · Nov 15, 2008

Obviously there are many variables. I agree with Harrington that it is generally better to pay off the mortgage (I always thought the tax deduction logic was banker's fools gold). Another huge variable is determining what you would do with the money if you didn't pay down the mortgage. Given the current climate and probable serious protracted recession worldwide, there is less incentive to invest the money. You say your rate is high (I once bought a house at 14.5%) which might mean 6-8%. There are few guaranteed investments that will pay that rate these days. Listen to your own instincts but definitely consider paying it off (I paid mine years ago and looking back, it saved my financial ass).

billhill999 · Nov 16, 2008

D2bets said:
How high is your rate? Why haven't you refinanced? Nothing wrong with paying it off, but make sure everything else is paid off first plus have a decent rainy day account. If you run out of cash it may not be as easy or cheap to get the money back out of your house. Plus depends on your tax rate

The interest rate is % 7.70. My wife had a "no income verification" mortgage as a bartender, Uncle Sam had no idea what her real income was and that was the only option. Six years later we owe 115 on a 124 loan, and we both just wanna get the monkey off our back. I can't imagine how great it will feel to own this shit hole outright.
(It's not really a shithole)

We think we are gonna do it. Thanks for the input.

CollegeFan · Nov 16, 2008

Pay it off. There are no disadvantages.

Tax deduction does not exceed what you will pay in interest.

But, if you have other debt at a higher interest rate (i.e. credit card debt, auto loan, etc), then pay off your higher interest rate stuff first.

quantumleap · Nov 17, 2008

billsgirl said:
BillHill999 and I are coming into some inheritance money next year, and we are strongly considering totally paying off the 115K owed on our 300K mortgage.

Has anybody else done this?
Are there any disadvantages?

On the surface, this seems like a solid idea, as our interest rate is a little high.

Consult a financial professional. There may be advantages to keeping a mortgage such as reducing capital gains taxes. Only someone who has all your financial information and has been educated in this field can give you the best solution and I'm talking about a potential savings of tens of thousands of dollars.

There is a reason these people are in business. If they didn't make it worth their client's while then no one would pay them.

CollegeFan · Nov 17, 2008

quantumleap said:
Consult a financial professional. There may be advantages to keeping a mortgage such as reducing capital gains taxes. Only someone who has all your financial information and has been educated in this field can give you the best solution and I'm talking about a potential savings of tens of thousands of dollars.

There is a reason these people are in business. If they didn't make it worth their client's while then no one would pay them.

Actually, not entirely correct. Just b/c one is a financial "professional" doesn't mean he/she knows wtf they are doing. (i.e. Is everyone good at their job just b/c they are employed at that job?)

SteakorBeans · Nov 17, 2008

One thing to consider is by paying off your house and homesteading it, you are protecting that money.

Here in Nevada I think you can protect up to 550k, it varies by state.

If you are sued or for whatever reason that people come after your money,
they can get your savings or investments but not your house.

Thats how OJ was able to keep his million dollar house in Florida when everyone was after him.

JudgeWapner · Nov 17, 2008

I paid mine off the minute I could. Hate owing money and paying interest.

quantumleap · Nov 17, 2008

College Fan said:
Actually, not entirely correct. Just b/c one is a financial "professional" doesn't mean he/she knows wtf they are doing. (i.e. Is everyone good at their job just b/c they are employed at that job?)

True. There is that disclaimer. Not all house cleaners clean a house well. Not all lawyers are going to give you good advice.

There are poor producers in every service job. I was referring to the profession as a whole.

buddyboy · Nov 18, 2008

whenever I am faced with a financial decision I turn to math and let that be the biggest influance as what to do.

google: pay off or invest calculators

OT: Disadvantages to paying off your mortgage?

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